On March 17, 20X4, Packer became a partner in Cats & Dogs Co., an already formed partnership. Packer does not have property to contribute and thus contributes services in exchange for his 5% interest in Cats & Dogs. Cats & Dogs’ net assets are as follows:

On Packer’s 20X4 tax return, what amount must Packer include as ordinary income from the receipt of the partnership interest?

a. $0

b. $7,500

c. $8,500

d. $8,750

Transcribed Image Text:

January 1, 20X4 March 17, 20X4 December 31, 20X4 Basis $150,000 150,000 150,000 Fair Market Value $150,000 170,000 175,000