Sample Answer to Question 2
The LLP is classified as a partnership unless it elects to be taxed as an "association" (corporation).
Formation
There is no gain or loss recognized by any party. Lisa's basis in her partnership interest (outside basis) is $100,000. Monty's outside basis is $30,000. The partnership's basis in the land is $100,000, and its basis in the stock is $30,000.
Admission of Newton
No gain or loss is recognized by any party on the admission of Newton. Each partner's capital account (book value of partners' equity) is $120,000 after the revaluation and admission of Newton.
Each partner's outside basis will include his or her respective share of the partnership's debt, under IRC § 752(a).
Sale of stock
On the sale of the stock, the partnership recognizes $140,000 of gain. Of this, $70,000 passes through to Monty under IRC § 704(c). Of the remaining $70,000, $40,000 passes through and is taxed equally to Lisa and Monty, but only $30,000 passes through and is taxed to Newton. Section 704(c) principles apply as the result of the revaluation. Reg. § 1.704-1(b)(2)(iv)(f).
Since Monty was a securities dealer, all of the income recognized by the partnership is ordinary income and passes through as such. IRC § 724(b).
Each partner's outside basis is increased by the gain passing through to that partner. IRC § 705. Each ends up with a capital account of $130,000.