Dave LaCroix recently received a 10 percent capital and profits interest in Cirque Capital LLC...
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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: Fair Market Value Basis Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Lance Robert Totals $ 130,000 180,000 210,000 $ 520,000 $ 130,000 227,000 320,000 $ 657,000 $ 190,000 165,000 165,800 $ 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
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