Dave LaCroix recently received a 10 percent capital and profits interest in Cirque Capital LLC in exchange for consulting services he provided. If Cirque Capital had paid an outsider to provide the advice, it would have deducted the payment as compensation expense. Cirque Capitals balance sheet on the day Dave received his capital interest appears below:

	Basis			Fair Market Value
Assets:
Cash	$	260,000		$	260,000
Investments		300,000			322,000
Land		200,000			390,000
Totals	$	760,000		$	972,000
Liabilities and capital:
Nonrecourse Debt	$	180,000		$	180,000
Lance*		290,000			396,000
Robert*		290,000			396,000
Totals	$	760,000		$	972,000

*Assume that Lances basis and Roberts basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse debt. (Leave no answer blank. Enter zero if applicable.)

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

b. Compute each members tax basis in his LLC interest immediately after Daves receipt of his interest.

Dave-

Lance-

Robert-

c. Prepare a balance sheet for Cirque Capital immediately after Daves admission showing the members tax capital accounts and their capital accounts stated at fair market value.

Cirque, LLC
Balance Sheet
	Tax Basis	704(b)/FMV
Assets:
Cash
Investments
Land
Totals
Capital:
Nonrecourse Debt
Capital-Lance
Capital-Robert
Capital-Dave
Totals

e. Compute each members tax basis in his LLC interest immediately after Daves receipt of his interest if Dave receives only a profits interest.

	Dave	Lance	Robert
Tax basis