The AB partnership is a law firm C an associate in the firm

The AB partnership is a law firm. C, an associate in the firm, is offered a one-third partnership interest in the future profits of the partnership. C is not required to make any capital contribution. Is C taxable upon his admission to the partnership?

Solution

Profits interest acquired for services rendered is not taxable on admission to the partnership.

Hence in the case, C is not taxable upon admission to the partnership