George and Lane are 50/50 partners in Blue Light General Partnership which owns and operates a hotel. They have owned the partnership for 5 years, and both have full-time jobs elsewhere. They have come to the realization that they need someone to manage the hotel for them. Their friend Jenna recently lost her job managing a similar hotel in another town nearby. George and Lane decide that this is the perfect opportunity to bring in a full-time manager, but they know that Jenna will not move to their town unless she can have an ownership in the partnership, so they decide to give her a 15% ownership in the partnership as of January 1, 2021, the date that she will begin managing the hotel. Jenna will continue to manage the hotel as long as she is a member of the partnership. George and Lane come to you with 2 questions: What, if any, is the tax consequence of granting the 15% interest to Jenna, both to Jenna and Blue Light? Is there a better way to do this that will have a more beneficial tax result for Blue Light and/or for Jenna?

Using the research problem from above, advise your clients in writing an effective and efficient tax research memorandum providing a thorough analysis of the issues, facts, and authoritative rule, statement, or regulation to determine an appropriate conclusion. Apply the modified IRAC method or format for research papers. The memo should be 600 to 900 words, double-spaced, and 12-point font.