Problem: Tony had a 40% interest in the Apollo LLC's profits and losses. The balance in his capital account was -$240,000 (negative capital). The LLC's only liability was $1,000,000 nonrecourse mortgage.
Q1. What would be the tax consequences to Tony if he sold one-half of his interest in the LLC to Zach for $100?
Q2. What would be the tax consequences for Tony if Zach became a partner by making a capital contribution and as a result Tonya's interest in the partnership profit and loss was reduced to 20%?