The December 31, 2019 balance sheet of the JKL Partnership appears below:

Each partner shares in 1/3 of the partnership capital, income, gains, losses, deductions and credits.  The partnership provides consulting services to its clients (capital is not a material income-producing factor).  On December 31, 2019, General Partner Lynn receives a distribution of $270,000 cash in retirement of her partnership interest.  Nothing is stated in the partnership agreement about goodwill.  

Required:

Assuming that Lynn’s outside basis for the partnership interest immediately before the distribution was $160,000, determine the amount and nature of her gain from the distribution.

What tax consequence does the $270,000 payment to Lynn have for the partnership?

What action or planning opportunity should the partnership consider and what effect would that action have?  

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Adjusted Fair Market Basis Value Cash S310,000 $310,000 Receivables 60,000 Capital assets 170,000 410,000 $480,000 $780,000 Jim, Capital $160,000 $260,000 Kim, Capital 160,000 260,000 Lynn, Capital 160,000 260,000 S480,000 $780,000 Adjusted Fair Market Basis Value Cash S310,000 $310,000 Receivables 60,000 Capital assets 170,000 410,000 $480,000 $780,000 Jim, Capital $160,000 $260,000 Kim, Capital 160,000 260,000 Lynn, Capital 160,000 260,000 S480,000 $780,000