1. Jane has a 50% interest in JB Partnership and intends to perform $10,000 worth of services in Year 1 for the partnership. Disregarding Jane’s services, JB Partnership has $80,000 of ordinary income and $20,000 of long-term capital gain during Year 1. Both Jane and JB Partnership use a calendar year, Jane uses the cash method of tax accounting, and JB Partnership uses the accrual method.

Determine the tax consequences (including timing and character) to Jane and JB Partnership:

1. For the services, Jane receives a $10,000 cash payment in Year 2. Assume that Jane did not perform the services in her capacity as a partner.

b. For the services, JB Partnership accrued a $10,000 expense to Jane in Year 1, and the partnership paid $10,000 cash to Jane in Year 2. Assume that Jane performed the services in her capacity as a partner.