ABC General Partnership is engaged exclusively in providing consulting services and capital is not a material income-producing factor in the partnership. The ABC General Partnership agreement, which was drafted in 2016, did not explain how a retiring partner would be paid for his or her share of partnership good will. In 2019, the partners signed an Amendment to ABC General Partnership Agreement which provided that Partner Smith was to receive $100,000 cash from the partnership on July 1, 2022 specifically to retire Partner Smiths interest in the partnership. That amount was broken down as follows: $30,000 was for Partner Smiths one-third interest in the fair market value of the assets of ABC General Partnership and $70,000 was a guaranteed payment or a payment for good will of ABC General Partnership. The IRS contends that the Amendment of ABC General Partnership Agreement is not clear and has determined that the $70,000 payment is ordinary income to Partner Smith and a deductible expense for the ABC General Partnership. Partner Smith prefers to have this transaction treated as a sale of his partnership interest to the partnership so that he can recover his basis in the partnership interest and treat the excess as a capital gain.

Is there statutory or case law or pronouncements from the IRS to support the position of the IRS?

Is there statutory or case law to support Partner Smith's reference?

Identify the relevant facts and any facts not provided that might help resolve the dispute.

Identify the issues that are relevant to the resolution of the dispute.

Describe your approach to the research, including steps that will be necessary to address the issues that are raised in this fact situation.