Bob and his large family corporation have been clients of yours for years. In 2014, Bob decides to set up a partnership with his daughter, Alycia to develop and sell vacation homes on the Saco river. Bob contributes a tract of land in exchange for a 50% interest in MEPartnership. The land's FMV is 300,000 with a basis of 30,000. Alycia contributes 150,000 in cash for a 50% ownership interest in ME partnership. A few months after forming ME Partnership, the North Bank lends 200,000 to the partnership. Of the loan proceeds, 75,000is paid to subdivide and plot the land. The other 125,000 is distributed to Bob. Bob tells youthis is a tax free transaction and he does not want to report it.
Six months later Bob's son, Alan decides to get in on the action. Alan has a letter of intent forthe purchase of a new property and would like to exchange the letter for a 1/3 interest in ME partnership.

Seven months later, George (a friend of the family) offers to provide legal and real estate services in exchange for a future profit interest of the properties.

To Do:

List at least 3 tax issues based on the above situation. Questions to answer include, what is The issue, why is it an issue, and what advice would you provide to the partners regarding the Referenced issue.

Reference:

IRC section 704 (b), (e)
U.S. v. James A. Basye, 410 U.S. 441 (USSC, 1973)
U.S. V. D. N. Strafford 727 F.2d 1043 (11thcir., 1984)
Use any other reference material you'd like. If you use additional material, please be sure to Post the additional references in you answer.