Chapter 21: 35, 42, 46, 47 and 49

1. Sam and Drew are equal partners in SD, LLC, formed on June 1 of the current year. Sam contributed Land that he inherited from his Uncle in 2005. Sam's Uncle purchased the land in 1980 for 30,000. The land was worth 100,000 when Sam's uncle died. The fair market value of the land was 200,000at the date it was contributed to the partnership.

Drew has significant experience developing real estate. After the LLC is formed, he will prepare a plan for developing the property and secure zoning approvals for the LLC. Drew would normally bill a third party 50,000 for these efforts. Drew will also contribute 150,000 of cash in exchange for his 50%interest in the LLC. The value of 50% interest is 200,000

a.How much gain or income will Sam...