Mark Green and his brother Michael purchased land in Orlando, Florida many years ago. At that time, they began their investing as Green Brothers Partnership with capital they obtained from placing second mortgages on their homes. Their investments have flourished both because of the prosperity and growth of the area and because they have shown an ability to select prime real estate for others to develop. Over the years, they have acquired a great amount of land and have sold some to developers.
Their current tax year has just closed, and the partnership has the following balance sheet:

Mark and Michael each have a basis in their partnership interest of $300,000 including their share of liabilities. They share the economic risk of loss from the liabilities equally. Last spring, Mark had a serious heart attack. On his doctor€™s advice, Mark wants to retire from all business activity and terminate his interest in the partnership. He is interested in receiving some cash now but is not averse to receiving part of his payment over time.
You have been asked to provide the brothers with information on how to terminate Mark€™s interest in the partnership. Several possibilities have occurred to Mark and Michael, and they want your advice as to which is best for Mark from a tax standpoint. Michael understands that the resulting choice may not be the best option for him. The possibilities they have considered include the following:
€¢ Michael has substantial amounts of personal cash and could purchase Mark€™s interest directly. However, the brothers think that option probably would take almost all the cash Michael could raise, and they are concerned about any future cash needs Michael might have. They would prefer to have Mark receive $120,000 now plus $110,000 per year for each of the next three years. Mark also would receive interest at a market rate on the outstanding debt. This alternative would qualify for installment reporting. However, the installment sale rules for related parties would apply.
€¢ The partnership could retire Mark€™s interest. They have considered the option of paying Mark $150,000 now plus 50% of partnership profits for the next three years. Alternatively, they could arrange for Mark to have a $150,000 payment now and a guaranteed payment of $100,000 per year for the next three years. They expect that the dollar amounts to be received by Mark would be approximately the same for the next three years under these two options. Mark also would receive interest at a market rate on any deferred payments.
€¢ John Watson, a long-time friend of the family, has expressed an interest in buying Mark€™s interest for $450,000 cash immediately. Michael and John are comfortable that they could work well together.
Mark has substantial amounts of money in savings accounts and in stocks and bonds that have a ready market. He has invested in no other business directly. Assume that, for each year, Mark€™s ordinary tax rate is 33% and his capital gains tax rate is 18.8% (the 15% capital gain rate for his tax bracket plus the 3.8% rate on net investment income).
Required: 
Prepare a memorandum summarizing the advice you would give the two brothers on the options that they have considered.

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Partnership's Basis FMV Assets: Cash $200,000 S 200,000 Accounts receivable 90,000 90,000 Land held for investment 1.010,000 Total S600,000 $1.300.00D Liabilities and capital: Mortgages S40D,0OD S 400,000 Capital-Mark 100,000 450,000 -Michael 100,000 Total S600,00 $1.300.000