ABC is an equal general partnership in which capital is not a material producing factor (i.e., a service partnership). A is planning to retire. On January 1, 2008, As outside basis is $100. The partnership has made an Internal Revenue Code Section 754 election. On this date, ABCs balance sheet is as follows (expanded to include goodwill and fair market values):

Assets Liabilities & Capital

AB/Book FMV Mortgage $150

Cash $120 $120

Accts Rec. 0 75

Building 90 255

Land 90 300

Goodwill 0 150

$300 $900

Capital Accounts

Tax/Bk FMV

A $50 $250

B 50 250

C 50 250

$150 $750

Assume that no principal payments are due on the mortgage until 2010. What are the tax consequences to A if, in the alternative:

(a) B and C purchase As partnership interest, each paying $125 cash?

(b) The partnership makes a lump sum payment to A in the amount of $250 in complete liquidation of As interest in the partnership, and the agreement makes no reference to partnership goodwill?

(c) The partnership makes a lump sum payment to A in the amount of $250 in complete liquidation of As interest in the partnership. Under the partnership agreement, $50 of the payment is specifically allocated to As share of the partnerships goodwill?

(d) How would your analysis in part (b) change if the partnership had equipment that had inherent recapture? No calculations are necessary.

(e) How would your answer to part (b) change if the partnership agrees to pay A the $250 over time: $50 in 2008, $100 in 2009 and a final $100 in 2010?