A and B each contribute $1,000,000 to a newly formed partnership and C contributes $2,000,000. The partnership buys LMN stock for $1,500,000 and XYZ stock for $3,500,000. After the value of the LMN and XYZ stock both fall to $1,000,000; the partnership distributes the XYZ stock to C in liquidation of his partnership interest. What is the basis of the stock to C upon distribution? What are further consequences to the partnership if a Section 754 election is in effect (in this case, it would be mandatory without a Section 754 election being in place).

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Consequenses to partnership if a section 754 election is in effect Since a Se... View the full answer