For years tax advisors have assumed that the receipt of a profits interest in a partnership in return for services is not a taxable event; instead, the stream of income derived from the profits interest is taxable as received. The only authority to the contrary was considered an "aberration" and nearly completely disregarded A tax court memorandum decision, Campbell v. Commissioner, appeared to change the way in which tax advisors must approach the topic. Mark IV Productions, Inc. v. Commissioner, a memorandum decision handed down only seven months after Campbell, however, abruptly altered once again the tax court's position on taxing the receipt of a partnership interest as income when received in exchange for services. Most recently, the Eighth Circuit reversed the tax court's decision in Campbell. The Eighth Circuit, however, did not settle this issue of partnership tax law. This Comment explores the history of the taxation of a partnership profits interest and discusses how the tax court's Campbell decision deviated from prior law. It also examines the recent Mark IV case, which fails to follow the Campbell analysis. Finally, this Comment analyzes the Eighth Circuit's opinion in Campbell. All three cases raise serious questions and confusion for anyone trying to advise clients of the tax liability on the receipt of a profits interest in a partnership in return for services.

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