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What are the tax consequences to the members upon the formation of an LLC?

April 26, 2017consequences FORMATION LLC members tax

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What are the tax consequences to the members upon the formation of an LLC?

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Generally, a person does not recognize gain or loss on property or cash contributed to an LLC in exchange for an interest in the LLC [IRC § 721]. The member’s basis in the LLC interest is equal to the amount of the cash and the member’s adjusted tax basis in the property contributed [IRC § 722]. Keep in mind it is possible for a member to recognize a gain on the contribution of appreciated property to an LLC. Speak to your tax advisor is this applies in your situation.