LLC partnership buyback tax question

[Richard Z.]

I have a question regarding LLC partnership buyout tax implication. I'm making a simple LLC scenario for easy discussion.

The LLC has three partners A B C. LLC did real estate development project: it bought a land and built three houses. At end of project LLC sold two houses on the market , used proceeds of sales to buy out two partners A and B, and then kept last house in the LLC for partner C as primary residence. After buyout, C is the only owner of LLC, and last house is C's primary residence. Does C need pay any tax due to the buyout transaction?

Assume these are the numbers:

Land acquisition: 1.5 MM

Subdivision and construction of 3 houses: 1.5MM

Sales price each house 1.5MM x 2 = 3MM

Each partners invested: 1MM

Partner A,B each got 1.5M after the buyout (from sales proceeds 1.5Mx2=3MM)

Partner C kept the house.

Notes: Assume the LLC OA allows membership buyout and all partners agreed on the transactions.

The purpose is mainly for partner C to avoid tax at buyout, and then use house as primary residence to sell after two year.

Thanks in advance.