Dave LaCroix recently received a $10$ percent capital and profits interest in Cirque CapitalLLC in exchange for consulting services he provided. If Cirque Capital had paid anoutsider to provide the advice, it would have deducted the payment as compensationexpense. Cirque Capital$$s balance sheet on the day Dave received his capital interestappears below:

Assets: Basis Fair Market Value

Cash $ $150,000$ $ $150,000$

Investments $200,000700,000$

Land $150,000250,000$

Totals $ $500,000$ $$1,100,000$

Liabilities and capital:

Nonrecourse Debt $100,000100,000$

Lance$*200,000500,000$

Robert $*200,000500,000$

Totals $ $500,000$ $ $1,100,000$

$*$Assume that Lance$$s basis and Robert$$s basis in their LLC interests equal their taxbasis capital accounts plus their respective shares of nonrecourse debt.

a$.$ Compute and characterize any gain or loss Dave may have to recognize as a resultof his admission to Cirque Capital.

b$.$ Compute each member$$s tax basis in his LLC interest immediately after Dave$$sreceipt of his interest.

c$.$ Prepare a balance sheet for Cirque Capital immediately after Dave$$s admissionshowing the members$$ tax capital accounts and their capital accounts stated at fairmarket value.

d$.$ Compute and characterize any gain or loss Dave may have to recognize as a resultof his admission to Cirque Capital if he receives only a profits interest.

e$.$ Compute each member$$s tax basis in his LLC interest immediately after Dave$$sreceipt of his interest if Dave only receives a profits interest