Bud Has Devoted His Life to His Business, the BK

question 63

Essay

Bud has devoted his life to his business, the BK Partnership, in which he owns an 85% capital and profits interest. Because he has worked so hard all his life, he never married and has no children. He has decided to give a 25% capital and profits interest to Berry, a close friend, if Berry will work in the business for five years. Berry will receive guaranteed payments for his work. Bud devotes all his time to the partnership, but he takes no salary. What tax issues should Bud and Berry consider with respect to the gift of the partnership interest and Bud's employment arrangement with the partnership?

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Definitions:

Phenomenology

A philosophy or method of inquiry based on the premise that reality consists of objects and events ("phenomena") as they are perceived or understood in human consciousness, and thus the study of those phenomena.

Person-centered Intervention

A counseling approach that emphasizes the importance of providing a supportive environment to enable clients to lead their own path to self-discovery and personal growth.

Empathy

The ability to understand and share the feelings of another from their perspective; it is central to effective communication and to building relationships.

Philosophical Reasons

The underlying rational concepts or thoughts that explain why something is done or believed in.