Frank, Greta, and Helen each have a one-third interest in the FGH Partnership. On December 31, 2019, the partnership reported the following balance sheet:

The partnership placed Asset 1 (seven-year property) in service in 2017 and Asset 2 (fiveyear property) in service in 2018. The partnership did not elect Sec. 179 expensing and elected out of bonus depreciation in both years. Accordingly, it computed the assets’ adjusted bases at December 31, 2019 as follows:

At the end of business on December 31, 2019, Helen sold her partnership interest to Hank for $190,000. At the time of sale, the partnership had a Sec. 754 optional basis election in effect but has not elected to use the remedial method for allocating partnership items. 

Required: The partners have asked you to determine (1) the amount and character of Helen’s gain or loss; (2) Hank’s optional basis adjustment and its allocation to Asset 1 and Asset 2; and (3) the amount of depreciation allocated to Hank in 2020, including the effects of the optional basis adjustment. At a minimum, you should consult the following resources:

• IRC Secs. 743 and 751

• Reg. Sec. 1.743-1(j)

• Reg. Sec. 1.755-1

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Partnership's Basis FMV Assets: Cash $120,000 262,380 115,200 $120,000 360,000 90,000 Asset 1 Asset 2 Total $497,580 $570,000 Partners' Capital: Frank $165,860 165,860 165,860 $190,000 190,000 190,000 Greta Helen Total $497,580 $570,000