Hayder received an interest in his employer, an LCC that is taxed as a partnership, as...
Hayder received an interest in his employer, an LCC that is taxed as a partnership, as compensation when the interest was worth $100,000. The interest is subject to restrictions that prevent his from transferring the interest if he is no longer with the company in 5 years, Hayder genuinely believes that the interest will be worth $400,000 or more in 5 years. How much income must Hayder report if he accepts this offer and no election is made?
1 $0
2 $100,000 in the current year
3 $400,000 in 5 years
4 indeterminable from facts provided
Homework Answers
ANSWER
Receiving an Interest in employer in a LLC means $100000 share of capital .
If after 5 years Hayder sells the ineterest at $400000 he would be subjected to a capital gain tax of approximately 20%.
Also the income of LLC would also be taxed to Waldo for the share Hayder holds as the LLC income is owner's income.
If Hayder recives $100000 it would be taxed as ordinary income and not treates as an investment unlike the above case
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