On March 17, 2017, 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’s net assets are as follows (including the value of Packer’s services received by the partnership):

On Packer’s 2017 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

Transcribed Image Text:

Basis Fair Market Value January 1, 2017 March 17, 2017 $150,000 $150,000 150,000 170,000 December 31, 2017 150,000 175,000