J&J, LLC Was in Its Third Year of Operations When

Essay

J&J, LLC was in its third year of operations when J&J decided to expand the number of members from two, A & B, with equal profits and capital interests to three members, A, B, and C. The third member, C, will contribute her financial expertise to the LLC in exchange for a 1/3 capital interest in J&J. Given the balance sheet below reflecting the financial position of J&J on the date member C is admitted, what are the tax consequences to members A, B, and C, and to J&J when C receives her capital interest? If, instead, member C receives a 1/3 profit interest, what would be the tax consequences to members A, B, and C, and to J&J?
$$\begin{array}{l}\text { Presidential Suites Partnership }\\\begin{array} { | l | c | c | c | } \hline & \text { Year-End } & \text { Profits } & \text { Capital } \\\hline \text { Lincoln, Inc. } & 3 / 31 & 35 \% & 30 \% \\\hline \text { Washington, Inc. } & 7 / 31 & 30 \% & 40 \% \\\hline \text { Blaster, Inc } & 11 / 30 & 35 \% & 30 \% \\\hline\end{array}\end{array}$$