ABC Partnership Balance Sheet January 1^st

Assets : Liabilities:

Tax Basis/Book FMV

Cash $240,000 $240,000 $150,000

Acct. Receivable $75,000 $60,000

Inventory $90,000 $150,000

Machinery $55,000 $100,000

Building $200,000 $500,000

Stock $90,000 $300,000

Goodwill $0 $300,000

Total $750,000 $1,650,000

Capital Accounts/Equity

Tax/Book FMV

Allie $200,000 $500,000

Brandon $200,000 $500,000

Carl $200,000 $500,000

Total $600,000 $1,500,000

Part a. What are the tax consequences to Allie if she were to sell her interest to Pedro for $500K cash? Assume that ABC purchased the machine three years ago for $120K, and that $120K in depreciation has been taken on the building since its acquisition five years ago.