An individual who contributes services in exchange for an unrestricted capital interest in a partnership has includible ordinary income equal to the fair market value of the capital interest.

Question

Quizplus · Accepted Answer

According to the Internal Revenue Code, if an individual contributes services to a partnership in exchange for an unrestricted capital interest, the fair market value of that interest is treated as includible ordinary income for the individual. This is known as the "capital interest transfer rules."

An Individual Who Contributes Services in Exchange for an Unrestricted