Wozniacki and others form Jewel LLC, with each receiving a one-fifth interest in the capital and profits of the LLC. Wozniacki receives the one-fifth interest as compensation for tax planning services rendered prior to the formation of the LLC. The other partners each contribute $182,300 cash. The value of a one-fifth capital interest in the LLC (for each of the parties) is $182,300.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wozniacki and others form Jewel LLC, with each receiving a one-fifth interest in the capital and profits of the LLC. Wozniacki receives the one-fifth interest as compensation for tax planning services rendered prior to the formation of the LLC. The other partners each contribute $182,300 cash. The value of a one-fifth capital interest in the LLC (for each of the parties) is $182,300.

a.   How much income does Wozniacki recognize as a result of this transaction, and what is its character?
Wozniacki recognizes $_________ .

b.   How much is Wozniacki's basis in the LLC interest? How will Jewel LLC treat this amount?

His basis is $____________ and the partnership 
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