In 2025 James and Dolley formed Madison Partnership, a car d…
In 2025 James and Dolley formed Madison Partnership, a car dealership in Fayetteville. In 2026, James and Dolley realized they needed an advertising expert to assist in their business. The two partners offered George, a marketing expert, a 1/3 capital interest in their partnership for contributing his expert services. George agreed to this arrangement and received his capital interest in 2026. If the value of the partnership’s capital equals $180,000 when George receives his 1/3 capital interest, which of the following tax consequences does not occur in 2026?