UEI is a partner in the Diamonds Are Forever Partnership (a general partnership). Mr. Wint and Mr. Kidd are the other partners in the partnership. Diamonds Are Forever has $100,000 of ordinary income for the current year. UEI's only responsibility as a partner during the year was to design a building which the partnership will construct in the near future. Under the partnership agreement, UEI is entitled to 20% of Diamonds Are Forever's taxable income. Mr. Wint called Bond in a panic this morning. Apparently, Wint's CPA is worried about Diamonds Are Forever's income allocation. Mr. Wint didn't do a very good job explaining the problem, so Bond has asked you to explain what the potential problem is here.

Answer rating: 100% (QA)

In this scenario the potential problem lies in the fact that UEI despite only having the responsibil... View the full answer