Problems

1.Consider whether the following situations will be respected as a partnership under theCulbertsonstandard:

(a)Father is a lawyer who makes Son (a contractor) and Daughter (a student) partners in his sole practitioner law firm.

(b)Father is a lawyer who makes Daughter (a law school graduate who has recently passed the bar) a partner in his sole practitioner law firm.

(c)Father owns a building and he transfers the building along with the lease to a partnership with Son and Daughter.

2.Father owns a group of commercial rental properties which he transfers to a partnership with Son and Daughter, who provide no consideration for their one-third interest in the partnership. Assume the partnership is respected for tax purposes. The income from the partnership is $90,000.

(a)What result if Father renders services worth $30,000 to the partnership but the partnership agreement merely calls for splitting the income equally among the three partners and each partner actually receives $30,000?

(b)What result if Father renders no services but the agreement provides the income is to be divided 20% to Father and 40% to Son and Daughter?

(c)What result if Father renders services worth $30,000 and the agreement is the same as in part (b), above?

(d)What result if Son renders services worth $30,000 and the agreement is the same as in part (a), above? See Reg. 1.704-1(e)(3)(i)(b)?

(e)What results in parts (a)-(d), above, if Son and Daughter purchased theirinterests from Father for fair market value?