ABC Partnership has three partners, an individual named Ron, an S Corporation, and a partnership. All three owners have equal ownership in ABC. Ron would like to leave the partnership and consulted with the other partners (The S Corporation and the other partnership) regarding the best strategy to exit the ABC Partnership. Ron obviously wants to pursue a plan that is in his best interest; however, the partnership agreement provides that before liquidating your interest, you must consult with the other partners prior to selling your interest to another partner. The other partners have a right to refuse other partners entering the partnership if no consultation has taken place. As a result, Ron consulted with the other partners. Primarily, Ron has two options to exit the partnership. Either Ron finds another interested partner that will buy him out or the partnership buys him out. All three partners hired you, their Tax Consultant to advice on the best strategy that will benefit all parties involved. Furthermore, ABC Partnership did had a Section 754 election in place. The partnership does hold hot assets (section 751 assets).

Required:

What questions would you ask to get more information?

What facts are essential to this research questions?

What are the partners alternatives? What is the best alternative?

List out the pros and cons of each alternative.