SAMPLE RESEARCH PAPER ACCOUNTING 367
FACTS
The taxpayer is multi-member entity, with each member holding a 50% membership interest. The taxpayer is primarily engaged in the purchase and sale of fine artistic pieces. The LLC intends to make a non-liquidating distribution of three (3) paintings, which are all held as inventory. Following the distribution, the distributee-member(s) intend to give an inter-vivos gift of the distributed inventory property to their daughter. The taxpayer is taxed as a partnership under the Internal Revenue Code (“IRC”), Subchapter K. In anticipation of the distribution and gift, we have researched the following issues related to any potential for recognition of income, gain or loss which would result from such distribution.

ISSUES
1. Whether a non-liquidating distribution of inventory by an LLC to its member(s), would result in the recognition of gain or loss?
2. What are the tax consequences to the distributee-partner(s) and the donee of an inter- vivos gift of previously distributed inventory?