A owns 50% of the ABC general partnership. The remaining 50% is owned equally by B and C. The partnership made a § 754 election. Prior to any distributions, A's outside basis is $550. On January 1, 2004, ABC distributes Land with a value of $400 in complete liquidation of her interest in the partnership. At the time of the liquidating distribution the partnership's balance sheet (after booking up) is as follows:

Assets Liabilities & Capital

Basis Book Liabilities

Inventory $100 $240 Mortgage $900

Land 250 400

Building 750 1060

Total $1100 $1700 Capital Accounts

Tax Book

A $100 $400

B 50 200

C 50 200

Total $200 $800

Questions:

a. What is the amount and character of any gain or loss recognized by each of the parties as a result of this transaction?

b. What is A's basis in the land received in the transaction?

c. What is the partnership's basis in the inventory and the building after the transaction?

Answer rating: 100% (QA)

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