Scenario C . X is a partnership, or an LLC taxed as a partnership. Under the partnership agreement or LLC operating agreement, all items of income, deduction, loss and credit are allocated equally among R, S and T. Problem 4.1. S is not a real estate dealer. The sale was not planned or contemplated prior to the organization of X. Problem 4.4.
X assumes the mortgage.
In Scenario C, assume that X is a general partnership. This revenue procedure provides guidance on the treatment of the receipt of a partnership profits interest for services provided to or for the benefit of the partnership. The following definitions apply for purposes of this revenue procedure. A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and then the proceeds were distributed in a complete liquidation of the partnership. This determination generally is made at the time of receipt of the partnership interest.