Problem 2. Mick and Keith are equal partners in newly formed partnership. Mick has a net operating loss carryover that is expected to expire at the end of the partnership 's second year. The partnership agreement is amended at the beginning of the second year to provide for the following allocations: (i) all of the second year's income to Mick and (ii) all future income to Keith until the effect of the income allocated to Mick in the second year is offset. The income of the partnership consists primarily of fixed royalties from record sales, which are expected to be $100 per year after the second year. Assume the allocations have economic effect and the partnership earns $400 of income in the second year.

(a) Are the allocations substantial?

(b) Would the answer to Question 2a change if the income of the partnership is expected to be only $50 per year after the second year?

Please provide correct answers and detailed explanation please?

Thank you!