A and B are equal partners in a personal services partnership. Each partner acquired her partnership interest for cash several years ago. None of the partnerships assets is Internal Revenue Code Section 704(c) property. The partnership has the following balance sheet:

Assets Liabilities and Partners Capital

A.B. F.M.V. A.B. F.M.V.

Cash $13,000 $13,000 $2,000

Capital Assets: Liabilities Capital:

Collectibles 1,000 3,000 A $10,000 15,000

Other 6,000 2,000 B 10,000 15,000

Subtotal 7,000 5,000

Receivables 0 14,000

Total $20,000 $32,000 $20,000 $32,000

Consider the tax consequences to B on her sale in each of the following alternative situations:

(a) B sells her interest for $15,000 cash.

(b) B sells her interest for $16,000 cash and under the partnership agreement all gain from the sale of the collectibles is allocated to B.

(c) Same as (a), above, except that the collectibles have a basis of $3,000 and a fair market value of $1,000, and the other capital asset has a basis of $4,000 and a fair market value of $4,000.