Albert, Bert, Clark, and David own equal interests in the capital and profits of an LLC that is taxed as a partnership. The LLC is a calendar-year taxpayer. For each of the following scenarios, determine (i) whether or not the LLC terminates and (ii) the tax consequences to the members:
a. Albert, Bert, and Clark simultaneously sell their entire interests in the LLC to David.
b. Albert, Bert, Clart and David simultaneously sell their entire interests in the LLC to Mr. Garrison, and unrelated third party.
c. On December 1, the LLC sells all its assets in exchange for a note of the purchaser. After December 1, the LLC merely holds the note and collects interest until March 31 of the following year, at which time the note is paid off and the LLC distributes the proceeds to the members in liquidation of the partnership.
d. Albert, Bert, and Clark form a new LLC. The new LLC purchases all of the assets of the old LLC, which liquidates by distributing the proceeds of the sale to the members.
e. Albert and Bert sell their entire interests to Clark and David, respectively, on the same day. Would your answer be different if Albert sells his interest six months after Bert sells his interest? One year and six months after Bert sells his interest?
f. Albert sells his interest to Bert, and, six months later, Bert sells Albert’s interest to Clark. Would your answer be different if Bert sells Albert’s interest to Mr. Garrison?
g. Albert and Bert each sell their entire interest in the LLC’s capital but only half of their respective interests in the partnership’s profits.
h. The partnership completely liquidates Albert’s and Bert’s interests on the same day.
i. Albert and Bert contribute their partnership interests to a corporation in exchange for stock of the corporation in a transaction governed by IRS 351.
j. Albert and Bert transfer their partnership interests on the same day to Mr. Garrison as a gift.
k. Albert and Bert each sell all but a de minimis amount of their LLC interests to Clark and David. A year and a day later, they sell the remaining portions to Clark and David.
l. The LLC converts to a general partnership.
a. Albert, Bert, and Clark simultaneously sell their entire interests in the LLC to David.
b. Albert, Bert, Clart and David simultaneously sell their entire interests in the LLC to Mr. Garrison, and unrelated third party.
c. On December 1, the LLC sells all its assets in exchange for a note of the purchaser. After December 1, the LLC merely holds the note and collects interest until March 31 of the following year, at which time the note is paid off and the LLC distributes the proceeds to the members in liquidation of the partnership.
d. Albert, Bert, and Clark form a new LLC. The new LLC purchases all of the assets of the old LLC, which liquidates by distributing the proceeds of the sale to the members.
e. Albert and Bert sell their entire interests to Clark and David, respectively, on the same day. Would your answer be different if Albert sells his interest six months after Bert sells his interest? One year and six months after Bert sells his interest?
f. Albert sells his interest to Bert, and, six months later, Bert sells Albert’s interest to Clark. Would your answer be different if Bert sells Albert’s interest to Mr. Garrison?
g. Albert and Bert each sell their entire interest in the LLC’s capital but only half of their respective interests in the partnership’s profits.
h. The partnership completely liquidates Albert’s and Bert’s interests on the same day.
i. Albert and Bert contribute their partnership interests to a corporation in exchange for stock of the corporation in a transaction governed by IRS 351.
j. Albert and Bert transfer their partnership interests on the same day to Mr. Garrison as a gift.
k. Albert and Bert each sell all but a de minimis amount of their LLC interests to Clark and David. A year and a day later, they sell the remaining portions to Clark and David.
l. The LLC converts to a general partnership.
