D, E and F form partnership DE.Partners D and E each contribute $150,000 each, and the partnership borrows $700,000, and with the proceeds builds a property it intends to lease and own.To induce individual F to provide leasing and management skills, partnership DE awards a 20% partnership interest to F.

Annual income is projected to be $100,000 per year, of which $20,000 will be allocated to F.If the property is sold in the same year for $2 million, F will receive 20% of the proceeds on liquidation.

a.How much income (if any) does F recognize in the year of receipt of the partnership interest?

b.Is there an alternative deal structure that will provide different economic (and tax) results and also allow F to be a partner in the deal?Describe the terms and expected results if a $2 Million sale results in the first year.