Matthew Broadway was a partner in the law firm of Johnson and Smith, a partnership of 20 partners, for the past 10 years. Without the knowledge or consent of the other partners, Matthew worked on a highly complicated acquisition and merger project for six months, at all times using the resources of the law firm.

Several months later, the firm for which Matthew provided the professional services made out a check for

$300,000 to the firm of Johnson and Smith. Matthew insisted that the fee should rightly be his, while the firm disputed his claim. Because of the dispute, the fee was held in escrow until the following year when the dispute was settled.

The dispute was settled with Matthew agreeing to withdraw from the partnership. Included as part of the withdrawal agreement was a clause that specified he would receive $45,000 of the $300,000 fee, with the law firm retaining the remainder. Six months later, Matthew received a total payment of $125,000, which included the $45,000 fee, from Johnson and Smith.

a. List as many possible tax research issues as you can to determine the tax treatment of the $125,000 payment received by Matthew.

b. After completing your list of tax research issues, list the keywords you might use to construct a computer tax research query.