Problem
Sean is admitted to the calendar year XYZ Partnership on December 1 of the current year in return for his services managing the? partnership's business during the year. The partnership reports ordinary income of? $100,000 for the current year without considering this transaction. Assume a nonleap year and that the partners agree to the proration method with a calendar day convention.
Requirements
a. What are the tax consequences to Sean and the calendar year XYZ Partnership if Sean receives a? 20% capital and profits interest in the partnership with a? $75,000 FMV?
b. What are the tax consequences to Sean and the XYZ Partnership if Sean receives only a? 20% profits interest with no determinable? FMV?