Background: When working in the tax department of a public accounting firm it is common to have to do tax research. The AICPA has guidelines as to how to communicate the results of tax research, which generally involve identifying the following:

$$ Facts

$$ Issue$($s$)$

$$ Discussion

$$ Conclusion

The discussion will involve the use and application of primary tax authorities, such as the Internal Revenue Code, Treasury Regulations, IRS administrative guidance, and court holdings. Your memo should be organized into the four sections shown above and should cite ONLY primary tax authorities.

Typically, a manager or a partner will assign the research task to you. He or she will share whatever knowledge they have as they are not looking to make your job difficult. The facts and discussion below will do the same thing.

Research Paper $2$

FACTS:

Fawn Hollow LLC$,$ is owned equally by three individuals, Mark Crenshaw, Thomas Miller, and Jerald Wolfowicz. The LLC was formed in $2014$ for the purpose of building and operating a hotel property with retail space and a parking garage. The three members have been actively involved in the operation of the facility. Fawn Hollow has filed as a partnership for federal income tax purposes.

The members of Fawn Hollow have signed a letter of intent to sell the property to an investment group comprised of four individuals. The buyers propose to acquire $100\%$ of the membership interests of Fawn Hollow. The buyers will first establish a new entity called Fawn Hollow Acquisitions, LLC$,$ and that entity will acquire the membership interests of Fawn Hollow. The purchase price is $$54$ Million. The tax basis of the assets of Fawn Hollow, which is the same as the tax basis of the membership interests, is $$23\mathrm{.}4$ Million.

The deal was made effective December $31,2023.$

REQUIRED:

Write a memorandum, using a facts$-$issue$($s$)-$discussion$-$conclusion format, to address:

$1.$ The tax consequences of this proposed transaction on the three members who will sell their membership interests.

$2.$ The tax consequences of the proposed transaction on the purchaser.

The partner in your firm has asked that your conclusions address at least the following, but also any other issues that you identify:

$$ The determination of gain and character of gain to the sellers

$$ The determination of basis to the purchasers

$$ Whether it will be necessary to file a Section $754$ election with the Fawn Hollow LLC tax return for the $2023$ tax year to allow the buyers to adjust the basis of the assets of Fawn Hollow.

$$ Whether Fawn Hollow and Fawn Hollow Acquisitions will be required to file a Form $8594$ to report allocation of purchase price. The partner wonders whether the existence of a Section $754$ election will determine if this form must be filed

$$ Whether it will be necessary to file a final tax return for Fawn Hollow in $2023$ based on the ownership change and, if so$,$ what is the due date for this return.