Exercise $10-18($Algorithmic$)($LO$.3)$

Wozniacki and others form Jewel LLC$,$ with each receiving a one$-$fifth interest in the capital and profits of the LLC$.$ Wozniacki receives the one$-$fifth interest as compensation for tax planning services rendered prior to the formation of the LLC$.$ The other partners each contribute $$228,775$ cash. The value of a one$-$fifth capital interest in the LLC $($for each of the parties$)$ is $$228,775.$

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

Wozniacki recognizes $fill in the blank $1$

as

$.$

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

His basis is $fill in the blank $3$

and the partnership

$.$