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: Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Tatsuki* Robert* Totals Assets: Cash Investments Land Totals Capital: Nonrecourse Debt Capital-Tatsuki Capital-Robert Capital-Dave Basis $ $ 150,000 200,000 150,000 $ 500,000 Cirque, LLC Balance Sheet Tax Basis $ 100,000 200,000 200,000 $ 500,000 *Assume that Tatsuki's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse liabilities. Note: Leave no answer blank. Enter zero if applicable. Fair Market Value Prepare a balance sheet for Cirque Capital immediately after Dave's admission showing the members' tax capital accounts and their pital accounts stated at fair market value. $ 150,000 700,000 250,000 $ 1,100,000 0 $ $ 100,000 500,000 500,000 $ 1,100,000 704(b) or FMV 0
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: Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Tatsuki* Robert* Totals Assets: Cash Investments Land Totals Capital: Nonrecourse Debt Capital-Tatsuki Capital-Robert Capital-Dave Basis $ $ 150,000 200,000 150,000 $ 500,000 Cirque, LLC Balance Sheet Tax Basis $ 100,000 200,000 200,000 $ 500,000 *Assume that Tatsuki's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse liabilities. Note: Leave no answer blank. Enter zero if applicable. Fair Market Value Prepare a balance sheet for Cirque Capital immediately after Dave's admission showing the members' tax capital accounts and their pital accounts stated at fair market value. $ 150,000 700,000 250,000 $ 1,100,000 0 $ $ 100,000 500,000 500,000 $ 1,100,000 704(b) or FMV 0
Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation
Section: Chapter Questions
Problem 55P
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Question
Transcribed Image Text: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:
Assets:
Cash
Investments
Land
Totals
Liabilities and capital:
Nonrecourse liabilities
Tatsuki*
Robert*
Totals
Assets:
Cash
Investments
Land
Totals
Capital:
Nonrecourse Debt
Capital-Tatsuki
Capital-Robert
Capital-Dave
Totals
$
Basis
*Assume that Tatsuki's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their
respective shares of nonrecourse liabilities.
Note: Leave no answer blank. Enter zero if applicable.
$
$ 150,000
200,000
150,000
$ 500,000
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
$ 100,000
200,000
200,000
$ 500,000
Fair Market
Value
0 $
$ 150,000
700,000
250,000
$1,100,000
0 $
$ 100,000
500,000
500,000
$1,100,000
704(b) or FMV
0
0
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