Blythe and Ella acquired a 5-acre tract of land on 8th Avenue South in the Melrose area of Nashville for $1,000,000 in 2010, as tenants in common. Each of Blythe and Ella contributed $100,000 to the down payment and they financed the remaining $800,000 of the purchase price with a 10-year, interest-only loan at 5% interest from a local credit union. The loan was secured by the 5-acre lot and any current and future structures attached thereto. Blythe and Ella were jointly and severally liable for the loan (i.e., recourse to each) and they had not entered into any separate contribution or sharing agreements between them with respect to this loan. The only structure on the lot was a dilapidated building that had been used by a car dealership several years ago. Although Blythe and Ella knew they could not rent the building given its current state of disrepair, they planned to install a self-pay parking terminal and charge $2/hour with a maximum of $20 for 24 hours to park in the lot that had been used by the dealership for its inventory. Initially, the plan was to generate enough parking revenue to cover the cash expenses interest on the loan, property taxes, insurance, electric bills to power the lights in the parking lotand then sell the lot to a developer whenever "they felt the time was right". Blythe and Ella agreed to share all profits and losses, including any gain or loss on the sale of the land, equally. The revenue from the parking lot was deposited into a joint checking account at the credit union that financed the purchase. Although both Blythe and Ella had signature and check-writing authority on the account, they agreed that Ella, who was a CPA, would maintain the check register and reconcile the monthly bank statements. Between the two of them, but not documented formally in any sort of agreement, Blythe told Ella that she did not need to get her consent whenever she needed to make a payment of less than $1,000. For amounts equal to or in excess of $1,000, both Blythe and Ella had to agree on whether to make the expenditure; if they could not reach an agreement, the expenditure would not be undertaken. In 2015, Melrose Place, LLC enter into separate Lease Agreements with the respective owners of the Omni Hotel on 5th Avenue South in Nashville and The Pinnacle at Symphony Place on 3rd Avenue South in downtown Nashville to lease the multi-level parking garage in each building. As the lessee of these garages, Melrose Place, LLC set the parking rates, staffed the garage, maintained the garage in accordance the standards set forth in the applicable Lease Agreement. At the Omni Hotel, Melrose Place, LLC also provided valet service for hotel guests. Melrose Place, LLC hired Luke, a recent graduate from Lipscomb University, to manage the parking lot on 8th Avenue South and the two downtown parking garages. In addition, Luke was tasked with growing the business by adding more leased parking lots to the LLC's portfolio. By the end of Luke's second year with the LLC, he had added two more downtown office towers, three hotels and the parking garage at Bridgestone Arena to the LLC's leased garage business. To reward Luke for his business development efforts and to incentivize him to remain with Melrose Place, LLC, Blythe and Ella decided to grant Luke a 10% membership interest that will vest on January 1, 2021, provided that Luke continues to provide services to the LLC on an uninterrupted basis as of such date. In connection therewith, the Operating Agreement of Melrose Place, LLC is amended to reflect this grant. Pursuant to this amendment, Blythe, Ella and Luke agreed to share profits and losses and liquidate, pro rata, in proportion to their respective ownership percentages; provided, however, that the liability encumbering the parcel on 8th Avenue South will be shared equally between Blythe and Ella. .(a) What are the tax consequences of granting the membership interests to Luke and the LLC on the grant date and the vesting date, assuming that he remains a service-provider? Your response should specify Luke's beginning capital account and address any and all tax elections that Luke should be aware in connection with this grant. In addition, you should include any recommendations to the LLC. .(b) Would your answer in 3(a) change if Luke resigned from the LLC before January 1, 2021? .(c) Assume that instead of January 1, 2021 vesting date, Blythe and Ella decided to vest Luke's membership interest equally on the following datesJanuary 1, 2018, January 1, 2019, January 1, 2020 and January 1, 2021. Further assume that Luke resigned from the LLC on December 31, 2019 to work for a real estate developer. Under the amended Operating Agreement, Luke will receive his capital account in two equal installments with the first payment on December 31, 2020. Please evaluate the tax consequences of Luke's resignation followed by the distributions