"Sam and Drew are equal partners in SD LLC formed on June 1 of the cur- rent year. Sam contributed land that he inherited from his uncle in 2007. Sams uncle purchased the land in 1982 for $30,000. The land was worth $100,000 when Sams 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."

"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. 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? e. Under the alternative treatment, how much income or gain would Sam recognize? f. Under the alternative treatment, what basis would the LLC take in the land con- tributed by Sam? g. How can the transaction be restructured to minimize risk of IRS recharacterization?"