Question

Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $260,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $260,000 and a tax basis of $165,000 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at §351 and §721.] (Leave no answer blank. Enter zero if applicable.)

c. MMT is formed as an LLC.

Answer 1

inscoor- C. MMT is formed as an LLC. Stalds per this provision, no gain to srecognised on transfer of property in sucharge of ocornership interest Since Mickey & mickayle both are Contaubuting property in Exchange of ownership interest lence, no gain ordinary income coill be secognized Mickey Total Conkaributing – $260000 for 4040 value of beelineis - 260000 650000 Share of taler = 650000 x.80 % =$130000 C) MMT S LLC , oricky (to) and » Mickayla (tos. > Taylor gain on ordinary income $ 130000