Scott provides accounting services worth $40,000 to the ABC Partnership in exchange for a 20% interest in the capital and profits of the partnership. The tax result to Scott is
A. a partnership interest with a zero basis and no gain or loss.
B. a partnership interest with a zero basis and $40,000 of ordinary income.
C. a partnership interest with a $40,000 basis and $40,000 ordinary income.
D. a partnership interest with a $40,000 basis and $40,000 capital gain.
Answer: C
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