It's not clear from the facts exactly how your equity interest is being acquired:
- When you say "grant" what exactly does this mean?
- Are you purchasing a 10% interest?
- Are you being "given" a 10% interest?
- If "yes" is this for services rendered?
- In addition to the above, you need to look at Revenue Ruling 99-5 which provides commentary on two different situations.
- Additionally, there could be the need for a Section 754 election
- There could be a need for a Section 704(c) allocation
- Unfortunately, partnership tax gets complicated very quickly, as a result, you should consider meeting with a tax professional to get started down the right path and so all parties understand the tax consequences.
- You will need an operating agreement
- You will need to maintain outside tax basis worksheets
- Based on the limited facts, the LLC may have special allocation(s) as a result of Section 754 or 704(c)
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
