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The UNM Partnership has three partners A, B, and C. C is an attorney and assists the partnership with drafting its partnership agreement. C is paid $20,000 from the partnership for this work. Describe the treatment of the payment to the UNM Partnership and to C (hint: include both income and SE tax, and deductibility of the payment at the partnership level (hint – look at the rules regarding organizational expenses)).

How would the answer in Part 1 change if C was compensated with a Profits Interest of 1%?