2. Five years ago T created a partnership to operate a fund to invest in various private enterprises. He raised $95 million from limited partners and invested $5 million of his own. T is the sole general partner. The partnership agreement provides that T will receive, as compensation for his services as general partner, (i) an annual management fee equal to 2% of the initial capital of the fund ($2,000,000 per year), and (ii) 20% of the funds profits (defined as realized gains). Net profits, i.e., realized gains minus Ts 2% management fee and 20% profit share, are divided among the partners in proportion to capital contributions.

The fund has been successful and this year it sold one of the stocks in its portfolio for a long term capital gain of $52 million. As a result, T receives the following in the current year:

(i) $2,000,000 as his annual management fee. (ii) $10,000,000 as his 20% profit share

(iii) $2,000,000 as his 5% share of the net profits that he receives as a result of his 5% capital contribution.

How will T be taxed on each of these amounts?