Question
X and Y plan to construct a mall. They have hired an architect (Z) to design the project, whose fee would normally be $100,000. X
X and Y plan to construct a mall. They have hired an architect (Z) to design the project, whose fee would normally be $100,000. X and Y propose that, in lieu of paying Z her normal fee, she receive an interest in the partnership in exchange for her services. Zs interest would entitle her to 8% of the partnerships gross income for its first three years of operations, at which point her interest in the partnership would terminate. X and Y have obtained signed lease agreements for most of the project, which will generate approximately $400,000 of gross rental income per year. What might be the advantage of organizing the venture in this way? Will it work?
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