8.10 Allen, Brewster and Clare own 50%, 40% and 10%, respectively, of the interests in Spacemaker LLC, a limited liability company truced as a partnership which is in the business of installing custom closet systems. Its balance sheet (with values added) is as follows:

Brewster wants out. Because Spacemaker is short on cash, Brewster agrees to surrender his interest in exchange for the partnership's investment in land (which happens to be an unimproved lot next to Brewster's house), valued at $32,000, and a new closet system from Spacemaker's inventory, valued at $16,000. Following this distribution, what is Brewster's tax basis in these two assets?

1. Inventory, $4,000; land, $36,000
2. Inventory, $4,000; land, $40,000
3. Inventory, $4,000; land, $84,000
4. Inventory, $13,333; land, $26,667

Liabilities FMV Tax/Book Assets Tax/Book $ 8,000 10,000 FMV $120,000 $120,000 Cash Inventory Receivables Equipment Land 42,000 120,000 40,000 $ 8,000 Bank Debt 40,000 42,000 118,000 Allen 32,000 Brewster Capital 50,000 40,000 10,000 60,000 48,000 12,000 Clare Total Liabilities $240,000 and Capital Total Assets $220,000 $220,000 $240,000