The SueBart LLC distributes the following assets to its member, Bart. l $10,000 cash. l An account receivable with a $10,000 value and a $0 basis to the entity. l A parcel of land with a $10,000 value and a $2,000 basis to the entity.
What issues must be considered in determining the Federal income tax treatment of the distribution?
Block, lnc., a calendar year general contractor, and Strauss, Inc., a development ISSUE ID corporation with a July 31 year-end, formed the equal SB LLC on January 1 of the current year. Both LLC members are C corporations. The LLC was formed to construct and lease shopping centers in Wilmington, Delaware. Block contributed equipment (basis of $650,000, fair market value of $650,000), building permits, and architectural designs created by Block’s employees (basis $0, fair market value $100,000). Strauss contributed land (basis $50,000, fair market value $250,000) and cash of $500,000. The cash was used as follows. Legal fees for drafting the LLC articles of organization $ 10,000 Materials and labor costs for construction in progress on shopping center 400,000 Office expenses (utilities, rent, overhead, etc.) 90,000
What issues must the LLC address in preparing its initial tax return?
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