Which of the Following Would Be Currently Taxable as Ordinary

question 3

Multiple Choice

Which of the following would be currently taxable as ordinary income to the service partner if received in exchange for services performed for the partnership? (In all cases,assume the interest is not sold within two years after the time it is granted to the service partner.)

• A)A 10% interest in the capital of the partnership that will vest in 3 years.
• B)A 20% interest in the future profits of the partnership received in exchange for future services to be performed for the partnership.
• C)A 25% interest in the capital of the partnership where there are no restrictions on transferability of the interest.
• D)All of the above.

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Definitions:

Discount Rate

The interest rate charged by central banks on loans to commercial banks or the rate used in discounted cash flow analysis to determine present value.

Simple Interest

Interest determined strictly on the base amount, or on the unpaid segment of that base amount.

Term Deposit

A deposit held at a financial institution for a fixed term that offers a fixed interest rate, where withdrawing money before the term ends usually incurs a penalty.

Bookkeeper

A person responsible for recording the financial transactions and maintaining the financial records of a business.