The ABC partnership has three equal partners, A, B, and C, and the following balance sheet:

Assets				Partner's Capital
	Adj. Basis	FMV		Adj. Basis	FMV
Cash	60,000	60,000	A	70,000	80,000
Cap Asset 1	90,000	60,000	B	70,000	80,000
Cap Asset 2	40,000	60,000	C	70,000	80,000
Cap Asset 3	20,000	60,000
	210,000	240,000		210,000	240,000

A receives capital asset #1 in an operating distribution. A has a one-ninth interest worth $20,000 in the partnership capital and profits after the distribution.

(a) What results to A and the partnership if there is no §754 election? Reconstruct the balance sheet after the distribution.

(b) What results to A and the partnership if the partnership has made a §754 election? Reconstruct the balance sheet after the distribution.

(c) How should any basis adjustment be allocated among the partners?