5 PROBLEM Taxing Partnership Operations- Characterization and Computation of Partnership Income Code References: SS 702(a), 702(b), 703(a), 704(a), and 724 Regulations: SS 1.701-2(a)-1.701-2(c), 1.702- 2(d) example (1), and 1.702- 1(a), and 1.702-1(b) Reading Assignment: Student Edition (Vol. 2) 11 9.011)-9.01[10] 1. QUESTIONS Jack is a chemist who never has owned real estate. Barney subdivides real estate as his primary business activity. They form a partnership. Two years later, the partnership sells one of its real properties at a gain after extensive marketing efforts. What are the tax consequences to the partners? The ABC partnership is composed of individual limited partners A and B and corporate general partner C. Each has a one-third interest in each item of in- come and deduction. A also operates a sole proprietorship. Determine each partner's distributive share of income and deductions, assuming the following receipts and expenditures: 2. 5P-1