Bruce died on June 1 of the current year. On the date of his death, he held a one-third interest in the ABC Partnership, which had a $100,000 basis including his share of liabilities. Under the partnership agreement, Bruce€™s successor-in-interest, his wife, is to receive the following amounts from the partnership: $130,000 cash, the partnership€™s assumption of Bruce€™s $20,000 share of partnership liabilities, plus 10% of partnership net income for the next three years. The partnership€™s balance sheet immediately before Bruce€™s death is as follows:

a. What are the amount and character of the gain or loss that Bruce€™s wife must recognize when she receives the first year€™s payment?
b. What is the character of the gain recognized from the partnership interest when she receives the payments in each of the following three years?
c. When does Bruce€™s successor-in-interest cease to be a member of the partnership?

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Partnership's Basis FMV Assets Cash $100,000 $100,000 Receivables 90.000 90,000 Inventory 40.000 40.000 70.000 220,000 an Total $300,000 S450,000 Liabilities and capital: Liabilities S 60,000 S60,000 80.000 130,000 160,000 260,000 Capital Bruce -Others Total S300,000 $450,000