Solution-What is the tax effect of Ds receipt of a profits

What is the tax effect of Ds receipt of a profits interest

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Question - DAK form a limited partnership. D is the 20% general partner, and A and K are each 40% limited partners. A and K each contribute $500,000 cash, and D, a petroleum engineer, contributes his agreement to work for and manage the partnership for 5 years in exchange for a 20% interest in future profits and losses. His interest in partnership profits vests immediately, D would receive nothing. If the partnership were liquidated immediately after formation, DAK takes out a recourse note for $2,000,000 and uses the cash proceeds of the note to purchase an existing oil and gas unit.

Required - What is the tax effect of D's receipt of a profits interest to the partnership and D?

Reference no: EM132869543

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What is the tax effect of Ds receipt of a profits interest

Reference no: EM132869543

Reference no: EM132869543

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