Problem 1.

ARE (Alice, Ralph & Ed) is an equal partnership that has made a 754 election. On January 1 of this year, Alices outside basis is $2100 and the partnerships balance sheet is as follows (expanded to include fair market values (000s omitted)):

Assets Liabilities & Capital AB/Book FMV Liabilities

Cash $3000 $3000 $1500

Accts Rec. 0 300

Inventory 300 600

Blackacre 1500 1200

Whiteacre 600 1200

Greenacre 900 1500

Total $6300 $7800 Capital Accounts Tax/Book FMV

Alice $1600 $2100

Ralph 1600 2100

Ed 1600 2100

Total $4800 $6300

NOTE: Blackacre, Whiteacre and Greenacre are all parcels of land. On this date, the partnership makes the following alternative distributions in liquidation of Alices interest in the partnership. Please determine the basis that Alice takes in each of the assets she receives, and the adjustments (if any) that the partnership must make to the each of its retained assets.

(a) Alice receives $600 cash, the accounts receivable and Blackacre.

(b) Alice receives $600 cash, the inventory, and Whiteacre.

(c) Alice receives $300 cash, the accounts receivables, and Greenacre

(d) Alice receives $1800 in cash and the receivables.

(e) What difference would it make in Problem #1(c), if there were no 754 election in place at the time of the distribution?