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If you own a capital interest (an equity stake) in a partnership, it generally means that you had made a capital contribution of some kind

If you own a capital interest (an equity stake) in a partnership, it generally means that you had made a capital contribution of some kind (typically cash or property) in exchange for your interest (Code 721). By contrast, if you own a profits interest only, you have no equity stake (youre not really a full owner even though entitled to some defined share of partnership profits) and therefore will not receive any payments in redemption of your interest when you decide to leave or retire.

In your own words, briefly compare and contrast the different result(s) of receiving (i) a capital interest vs. (ii) a profits interest (only) in a partnership in exchange for performing services to or on behalf of that partnership. And explain the very simple, very common-sense reason for that difference.

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