Exercise $10-17($Algorithmic$)($LO$.3)$

Wozniacki and Wilcox form Jewel LLC$,$ with each receiving a one$-$half interest in the capital and profits of the LLC$.$ Wozniacki receives the

one$-$half interest as compensation for tax planning services rendered prior to the formation of the LLC$.$ Wilcox contributes $$118,925$ cash.

The value of a one$-$half capital interest in the LLC $($for each of the parties$)$ is $$118,925.$

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

Wozniacki recognizes $

as

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

His basis is $

and the partnership