As you may recall, I$$ve mentioned that one of our clients $($Be Green LLC$)$ has been struggling for a few years now. Carl Brown and Maria Green formed an LLC several years ago with the anticipation that federal regulations will change and a product $($prototype$)$ that they have been

working on will be in high demand once the federal government issues projected regulatory changes. However, in the interim, they have incurred losses for the last several years while working

on this prototype, for which there was no demand. In fact, as you can imagine, the losses generated over the past several years have been such that most of the members$$ bases are now down to zero.

But, as Be Green had hoped and were anticipating, the federal government did change the regulations such that the prototype that Be Green has developed will now be in high demand.

The company has secured some very promising contracts, and they are now anticipating significant profits in the upcoming years. However, for the short$-$term they will need to obtain some financing due to the short$-$term needs to get these prototypes made for the anticipated demand due to the contracts secured.

In order to raise capital, Be Green took on new members in exchange for an interest in the LLC$.$ Be Green is planning to use this capital injection to support the company$$s operations to build the

necessary inventory of prototypes to fill the contracts they have secured.

However, now that Be Green is looking at generating profits, they are entertaining the idea of converting a C corporation. There aren$$t a significant amount of assets on the books and they haven$$t made any IRC Section $754$ elections. The only assets they have include cash on hand of $$600,000,$ they own some fixed assets $($Property$,$ Plant and Equipment$)$ with combined adjusted bases of $$600,000($and FMV of $$600,000)$ and the contracts with the customers with an estimated

fair market value of $$1,100,000.$

Carl and Maria, the original owners of Be Green each have a $50\%$ interest in the company $($both capital and profit interest$).$ They have asked us to evaluate the tax consequences of converting to a

C corporation for them as well as for the new corporation. Specifically, I want you to look at three different conversion structures:

$(1)$ Contribution by the partnership of its assets to the corporation in return for stock and

then liquidation of the partnership;

$(2)$ A distribution by the partnership of its assets to its partners, followed by a contribution

of those assets by the partners to the new corporation; and

$(3)$ A contribution by the partners of their partnership interest to the new corporation in

return for stock.

There are a few areas you will want to consult while evaluating this for Carl and Maria. Specifically, Rev.Rul. $84111,$ Rev.Rul. $200459$ and Reg. $301\mathrm{.}77013($g$)($i$)$ may be useful. I want you to use RIA Checkpoint to conduct the research.

PLEASE HELP ME DECIDE WHETHER THE COMPANY SHOULD SWITCH OVER TO A C CORP AND WHICH CONVERSION WOULD BE MOST ADVISABLE FOR TAX PURPOSES. THANK YOU!