What is bill stock basis after the distribution

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Q1. Wozniacki and others form Jewel LLC, with each receiving a one-fourth interest in the capital and profits of the LLC. Wozniacki receives the one-fourth interest as compensation for tax planning services rendered prior to the formation of the LLC. The other partners each contribute $68,225 cash. The value of a one-fourth capital interest in the LLC (for each of the parties) is $68,225.

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

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

Q2. Night Watch, a calendar year S corporation, distributes $127,300 cash to its only shareholder, Bill, on December 31. Prior to the distribution, Bill's basis in his stock is $152,760, Night Watch's AAA balance is $57,285, and Night Watch has $19,095 AEP. What is Bill's stock basis after the distribution?

Reference no: EM133140612

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