Question
When the PDQ Partnership formed, it knew it had a good product, but it was a bit short on cash. After seeing the product, Bob,
When the PDQ Partnership formed, it knew it had a good product, but it was a bit short on cash. After seeing the product, Bob, a CPA, said that he would set up an accounting system for the partnership in exchange for a 15% profits interest in the partnership. The partners agreed to this, as Bob was receiving only a profits interest and not a capital interest in the partnership. Bob's usual fee for this type of service would be approximately $5,000. What tax issues should Bob and the PDQ Partnership consider with respect to the payment made for the services?
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