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which of the following statements about the transaction of a partner agreeing to contribute service for an increased profits interest is TRUE? I. On the

which of the following statements about the transaction of a partner agreeing to contribute service for an increased profits interest is TRUE?

I.

On the date of the agreement, the service partner must immediately recognize ordinary income for the additional profits interest, and the non-service partners are able to immediately recognize an ordinary deduction for the profits interest they each give up.

II.

The partners have no immediate recognition of income (or deductions) for the profits interest but as profit is earned in the future it will affect each partners potential taxable income because of the change in how much partnership profits (or losses) are allocated to partners in the future.

III.

The agreement transaction cannot immediately alter the partners outside tax bases.

IV.

The agreement transaction can immediately alter the partners outside tax bases depending on the type of debt the partnership has.

V.

Both I. and III. are true.

VI.

Both II. and IV. are true

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