65. Case Study. FDR Partners is a large regional partnership. This year, Rusty acquired an interest in the firm by purchasing it from an existing partner. The firms balance sheet just prior to Rustys acquisition was as follows: Basis FMV Cash 30,000 30,000 Accounts Receivable 0 151,000 Building 150,000 200,000 Land 32,000 50,000 TOTAL ASSETS 212,000 431,000 Liabilities 125,000 125,000 Partners capital 87,000 306,000 TOTAL LIABILITIES & CAPITAL 212,000 431,000 Rusty paid $50,000 for the newly purchased interest, which represented a ten percent interest in the firm. The partnership does not currently have a Section 754 election in effect. Our firm has advised Rusty that the partnership should make a Section 754 election for his benefit. Review Reg. 1.754-1 and prepare a memorandum explaining how the Section 754 election is made and when it must be made in order to benefit Rusty. Also illustrate to Rusty the different tax consequences for him if the election is made vs. if it is not made