a. How much gain or income will Sam recognize on his contribution of the land to the LLC? What is the character of any gain or income recognized? None. Under § 721, neither the LLC nor any of the members recognize gain on contribution of property to a LLC in exchange for an interest in the LLC.
b. What basis will Sam take in his LLC interest? $100,000. Sam’s basis in his LLC interest will equal the basis he held in the property he inherited from his uncle. The basis a beneficiary takes in property received from an estate generally equals the fair market value of the asset at the date of death or at the alternate valuation date