Geraldine, an attorney, rendered legal services in organizing an oil and gas partnership in the current year. Instead of submitting a bill for her services. Geraldine accepted a 10% capital interest in the partnership. Geraldine's normal charge for the services performed would have been $10,000. The fair market value of the 10% interest received by Geraldine was $12,000. How much should Geraldine report on her current year's income tax return

Geraldine

The amount that Geraldine should report on her current year's income tax return as income from the above exchange is:

= $10,000.

Explanation:

a) Data and Calculations:

Geraldine's normal charge for the services performed = $10,000

The fair market value of the 10% interest received by Geraldine = $12,000

Geraldine's partnership interest = 10%

This is because $10,000 is also her basis in the partnership interest and not $12,000 the fair market value of the 10% interest.