1.6 Julian is a real estate dealer who buys and sells residential building lots in the ordinary course of his trade or business. As the result of the death of a local celebrity, he has an opportunity to acquire a valuable, oceanfront property. His accountant advises him to "buy it through a partnership." So Julian forms Beach Drive LLC, a limited liability company taxed as a partnership, with another dealer, for the sole purpose of acquiring, marketing and selling this lot. Julian contributes 90% of the equity required to purchase the property and both dealers list it for sale by Beach Drive LLC on their websites. Sure enough, the lot appreciates, and 15 months later, Julian sells his 90% interest in Beach Drive LLC for $900,000 more than its cost. The other dealer continues to own his 10% interest. What are Julian's tax consequences on this sale? a) Julian has $1 million of ordinary income, because Beach Drive LLC is a sham that should be treated as a disregarded entity. v) duilan has $900,000 of ordinary income, because he would have compensation income if the company sold the property. c) Julian has $900,000 of ordinary income, because the lot owned by Beach Drive LLC would be considered inventory if Julian held it directly. d) Julian has $900,000 of capital gain under section 741