Which of the Following Would Be Currently Taxable as Ordinary

question 176

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 that 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 if the partner remains in the partnership for three 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 when there are no restrictions on transferability of the interest.
• D) A 30% interest in the capital of the partnership when the partner contributes intangible property with a $0 basis that the partner developed.
• E) All of these.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset evenly over its useful life, assigning a fixed expense amount to every accounting period.

Fixed Asset

A durable, physical asset that a company possesses and employs in its business activities to produce revenue.

Salvage Value

Salvage value is the estimated residual value of an asset at the end of its useful life, indicating how much the asset can be sold for after it is no longer useful for its intended purpose.

Estimated Life

The expected period over which an asset will be useful in the operations of a business.