Since October, year l, A and B have operated an equal law partnership. Each partner contributed $30,000 to the partnership's formation with which it purchased the small office building where they practice in a suburban community (NOTE: for this problem ignore depreciation and assume original cost of bldg. was $60,000). In December, year 3, the partners seek to persuade C, a highly respected tax attorney, to join them as a partner. C has no money or property to contribute. Nevertheless, A and B are willing to give him a one-third interest in the capital, profits, and losses of the partnership. C agrees to join the firm and to establish and conduct a tax department. (NOTE: On the date C agrees to join the firm, the fair market value of the Building is $120,000. Assume this is the only asset of the partnership).  a. What are the tax consequences to C on the transfer to him of the partnership capital interest, including:  1. The amount of income and its character for tax purposes, 2. The outside basis and holding period of the interest received? 

b. What are the tax consequences to the partnership on the transfer, including:  1. Gain or loss recognized and its character, 2. Adjusted basis (inside basis) and holding period of partnership property after the transfer, 3. Deductions of the partnership? 

c. What are the tax effects to C and the partnership if the partnership agreement provides that C cannot sell his partnership interest unless he has performed services-for the partnership until the earlier of his death or five years from the date he entered the partnership?  1. If C reports the partnership interest as income by electing 83(b) 

2. Does not elect to report income under 83(b)