Continue with the facts presented in Problem 33. At the end of the first year, the LLC distributes $100,000 cash to Sam. No distribution is made to Drew.

In Problem 

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 2007. Sam's uncle purchased the land in 1982 for $30,000. The land was worth $100,000 when Sam's uncle died. The fair market value of the land was $200,000 at 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 cash in exchange for his 50% interest in the LLC. The value of his 50% interest is $200,000.

a. Under general tax rules, how would the payment to Sam be treated?

b. How much income or gain would Sam recognize as a result of the payment?

c. Under general tax rules, what basis would the LLC take in the land Sam contributed?

d. What alternative treatment might the IRS try to impose?