On March 17, 20X4, Packer became a partner in Cats & Dogs Co., an already formed
ID: 2463070 • Letter: O
Question
On March 17, 20X4, Packer became a partner in Cats & Dogs Co., an already formed partnership. Packer does not have property to contribute and thus contributes services in exchange for his 5% interest in Cats & Dogs. Cats & Dogs' net assets are as follows:
Basis
Fair Market Value
January 1, 20X4
$150,000
$150,000
March 17, 20X4
150,000
170,000
December 31, 20X4
150,000
175,000
On Packer's 20X4 tax return, what amount must Packer include as ordinary income from the receipt of the partnership interest?
a. $0
b. $7,500
c. $8,500
d. $8,750
Basis
Fair Market Value
January 1, 20X4
$150,000
$150,000
March 17, 20X4
150,000
170,000
December 31, 20X4
150,000
175,000
Explanation / Answer
Ordinary Income
170000*5% = $ 8500
The ordinary income will be recognised as amount equal to the value of the aprtnership interest as of the date on which the services have been provided.
The correct option is C. $ 8500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.