Daniel, an attorney, is approached by a new client, a start-up company that has yet to formally organize. The start-up company asks Daniel to prepare a partnership agreement and file the agreement with the Secretary of States Office. Additionally, Daniel is asked to file any other legal paperwork required for the company to operate as a limited partnership. In exchange for Daniels work, the start-up offers Daniel a 5% limited partnership interest. If you were advising Daniel (NOT the start-up), what should be his greatest concern?

a. Daniel would be responsible for paying taxes on receipt of the partnership interest because services contributed do not qualify under 721.

b. Daniel might receive a partnership interest in the start-up that may not be worth anything down the road.

c. Daniel can defer gain or loss recognition on the arrangement under 721

. d. None of the above