1.On January 1, Year 1, A, B, and C join together to form an equal partnership. A and B contribute $30,000 each to the partnership. C does not make a capital contribution, but instead agrees to act as the manager of the partnership's business. Each of A, B, and C receives a one-third interest in the capital, profits, and losses of the partnership. What are the tax consequences to C on the transfer of the partnership capital interest, including (a) the amount of income, gain, or loss and its character for tax purposes and (b) the adjusted basis and holding period of the interest received? What are the tax consequences to the partnership on the transfer, including (c) the income, gain, or loss realized and (d) deductions? Assume, in each case, that the value of the partnership interest transferred to C is $20,000.

2.What if, in 1. above, C previously negotiated a contract to purchase a new office building in which to locate the business of the partnership and contributes the contract to the partnership?