A, b and c decide to form a partnership for the purpose of developing real property. a and b are wealthy individuals, with no particular real estate experience. c is an experienced developer. the parties agree that a and b will each contribute $1,000,000 to the venture, and that c will contribute his expertise. what tax consequences will result from formation of the venture under each of the following alternatives? (a) in exchange for cash contributions of $1,000,000 apiece, a and b each receive a forty percent interest in the profits, losses and capital of the venture. in exchange for his future services c receives the remaining 20% interest in profits, losses and capital.
(b) in exchange for their cash contributions a and b each receive a 50% interest in capital and losses. profits of the venture are divided 40% to a, 40% to b, and 20% to c.