Darius, Emma and Fran form an LLC. Darius and Emma each contribute $3,000 cash to the LLC. Fran contributes no property, but agrees to provide services and manage the LLC. Darius and Emma receive a one-half interest in the LLC’s capital. Fran receives no interest in the LLC’s capital. However, Darius, Emma, and Fran agree to share future profits equally among the three of them. The amount of the LLC’s future profits and losses is uncertain. The LLC’s operating agreement entered into by the members states that upon the LLC’s liquidation, distributions will be made in accordance with the balance in each member’s capital account. How much ordinary income does Fran recognize on the receipt of her membership interest upon formation of the LLC?

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