P 73 the ab partnership is a law firm c an associate

4. Problem 1 (p. 73). The AB partnership is a law firm. C, an associate in the firm,
is offered a one-third partnership interest in the future profits of the
partnership. C is not required to make any capital contribution. Is C taxable
upon his admission to the partnership?
5. Problem 2 (p. 74). C, an experienced real estate manager, receives a
nonforfeitable one-tenth profits interest in the AB general partnership, whose
sole asset is a commercial building with a value of $1,000,000 in return for his
agreement to render management services in his capacity as a partner. Net
rentals from the building recently have been averaging $100,000 per year.
has been asked to manage the building in the hope that his expertise will
increase the rental income and ultimately lead to a profitable sale of the
property.
a. (a) What are the tax consequences to C upon receipt of the profits
interest?
C
b. (e) What result to C and to the partnership in (a), above, if C’s profits
interest was subject to forfeiture until C rendered services for the
partnership for a period of five years?
.
2. Problem 2 (p. 74). C, an experienced real estate manager, receives a
nonforfeitable one-tenth profits interest in the AB general partnership, whose
sole asset is a commercial building with a value of $1,000,000 in return for his
agreement to render management services in his capacity as a partner. Net
rentals from the building recently have been averaging $100,000 per year.
has been asked to manage the building in the hope that his expertise will
C
31