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 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 $12,000 Liabilities: $2,000

Capital Assets: 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:

1. B sells her interest for $15,000 cash
2. 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
3. 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.