A, B and C are equal partners in the ABC partnership which has the following balance sheet:

Assets Partners Capital

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

Cash $6,000 $6,000 A $12,000 $18,000

A/R 0 9,000 B 12,000 18,000

Inventory 18,000 18,000 C 12,000 18,000

Land & Building 6,000 12,000

Equipment 6,000 9,000

$36,000 $54,000 $36,000 $54,000

The partnership distributes the $9,000 worth of accounts receivable to A and $18,000 worth of inventory equally ($9,000 each) to B and C.

(a) Is Internal Revenue Code Section 751(b) applicable to this operating distribution?

(b) What does this tell you about Internal Revenue Code Section 751(b)?

(c) Should Internal Revenue Code Section 751(b) be repealed?