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How much income does FM recognize

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Problem - On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows:

 

Adjusted Basis

Fair Market Value

From Fenton:

Cash

$50,000

$50,000

Accounts receivable

-0-

90,000

Inventory

25,000

60,000

From Myers:

Cash

200,000

200,000

Within 30 days of formation, FM collects the receivables and sells the inventory for $60,000 cash. How much income does FM recognize from these transactions, and what is its character? Why does this result apply?

Reference no: EM132663190

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