Which of the Following Would Be Currently Taxable as Ordinary

question 5

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)A 30% interest in ongoing profits of the partnership where the partnership is not a publicly-traded partnership and the income stream is not assured.
• E)All of the above.

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Definitions:

Rating Agencies

Companies that assess the financial strength of entities, like corporations and governmental bodies, and their ability to meet financial obligations, issuing ratings that reflect that assessment.

Valuation

A systematic process to determine the price at which a security should sell in financial markets.

Designated Market Maker

A designated market maker is a market participant responsible for maintaining liquidity in a financial market by buying and selling securities.

Securities

Assets indicating equity in a publicly-traded company, a bond signifying indebtedness to a company or government, or options granting ownership rights.