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 Capital's balance sheet on the day Dave received his capital interest appears below: Basis Fair Market Value $ 130,000 180,000 210,000 $ 520,000 $ 130,000 207,000 320,000 $ 657,000 Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Lance* Robert* Totals $ 190,000 165,000 165,000 $ 520,000 $ 190,000 233,500 233,500 $ 657,000 *Assume that Lance's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse liabilities. (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. Gain or loss recognized as Ordinary income b. Compute each member's tax basis in his LLC interest immediately after Dave's receipt of his interest. Dave Lance Robert Tax basis c. Prepare a balance sheet for Cirque Capital immediately after Dave's 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 $ 130,000 $ 180,000 210,000 520,000 $ 130,000 207,000 320,000 657,000 $ Assets: Cash Investments Land Totals Capital: Nonrecourse Debt Capital-Lance Capital-Robert Capital-Dave Totals 190,000 $ 190,000 $ 190,000 $ 190,000 e. Compute each member's tax basis in his LLC interest immediately after Dave's receipt of his interest if Dave receives only a profits interest. Dave Lance Robert Tax basis 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 Capital's balance sheet on the day Dave received his capital interest appears below: Basis Fair Market Value $ 130,000 180,000 210,000 $ 520,000 $ 130,000 207,000 320,000 $ 657,000 Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Lance* Robert* Totals $ 190,000 165,000 165,000 $ 520,000 $ 190,000 233,500 233,500 $ 657,000 *Assume that Lance's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse liabilities. (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. Gain or loss recognized as Ordinary income b. Compute each member's tax basis in his LLC interest immediately after Dave's receipt of his interest. Dave Lance Robert Tax basis c. Prepare a balance sheet for Cirque Capital immediately after Dave's 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 $ 130,000 $ 180,000 210,000 520,000 $ 130,000 207,000 320,000 657,000 $ Assets: Cash Investments Land Totals Capital: Nonrecourse Debt Capital-Lance Capital-Robert Capital-Dave Totals 190,000 $ 190,000 $ 190,000 $ 190,000 e. Compute each member's tax basis in his LLC interest immediately after Dave's receipt of his interest if Dave receives only a profits interest. Dave Lance Robert Tax basis
