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:

Assets: Basis Fair Market Value

Cash $ 150,000 $ 150,000

Investments 200,000 700,000

Land 150,000 250,000

Totals $ 500,000 $1,100,000

Liabilities and capital:

Nonrecourse Debt 100,000 100,000

Lance* 200,000 500,000

Robert* 200,000 500,000

Totals $ 500,000 $ 1,100,000

*Assume that Lances basis and Roberts basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse debt.

1. Compute and characterize any gain or loss Dave may have to recognize as a result of his admission to Cirque Capital.
2. Compute each members tax basis in his LLC interest immediately after Daves receipt of his interest.
3. 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.
4. Compute and characterize any gain or loss Dave may have to recognize as a result of his admission to Cirque Capital if he receives only a profits interest.
5. Compute each members tax basis in his LLC interest immediately after Daves receipt of his interest if Dave only receives a profits interest.