3.2 A revaluation of all of a partnership's property, resulting in increases or decreases in the book capital account balances of the partners, is:

a) Required whenever a new partner is admitted to the partnership or a partner's interest is liquidated

b) Required whenever a reverse section 704(c) allocation must be made

c) Required in certain circumstances in order to eliminate book-tax differences in the partnership's assets

d)Not generally required under existing law, but failure to make a revaluation may have collateral federal income tax consequences

3.6 Individuals A, B and C contribute $10,000 each in cash to form Partnership ABC, a limited partnership of which C is the sole general partner. They agree to share profits and losses as follows:

Losses: 40% to each of A and B and 20% to C

Profits: 40% to each of A and B and 20% to C to the extent of previous losses; thereafter, 30% to each of A and B and 40% to C

The partnership agreement provides for the proper maintenance of capital accounts and for liquidating distributions to be made in accordance with the capital accounts, and all partners agree to an unlimited deficit-restoration obligation that is recognized under Treas. Reg. 1.752-2(b)(3). Immediately following its formation and before any profits or losses are incurred, Partnership ABC borrows $60,000 on a recourse basis to finance the acquisition of a small industrial building. What is the initial outside basis of each of the partners?

a) A, $10,000; B, $10,000; C, $70,000

b) A, $26,000; B, $26,000; C, $8,000

c) A, $34,000; B, $34,000; C, $22,000

d) A, $36,000; B, $36,000; C, $18,000

3.8 Brody and Corbett establish BC Land Company LLC, a limited liability company taxed as a partnership, for the purpose of making leveraged investments in real estate. Brody contributes Land B, worth $650,000, which he purchased for $350,000 ($150,000 borrowed on a purchase-money mortgage) years ago. The partnership assumes Brody's $150,000 mortgage. Corbett contributes $500,000 in cash. Brody and Corbett have equal interests in the partnership, which borrows $500,000 for the purpose of making additional real-estate investments. Corbett hires you to give him tax advice in connection with his investment in BC Land Company. One of the first issues to arise is the choice of the partnership's section 704(c) method. You advise Corbett:

a) The choice of section 704(c) method doesn't matter, because all the deductions will be nonrecourse deductions.

b) The choice of section 704(c) method doesn't matter, because Brody will recognize the built-in gain in Land B upon contribution.

c)The traditional method will be best for Corbett.

d)The remedial method will be best for Corbett.