Amy, Shannon, and Cameron are equal partners in the ASC Partnership. On January 1^st of the tax year, Amy and Shannon have an outside basis of $330,000 and Cameron has an outside basis of $250,000. The company’s balance sheet (including FMVs) is as follows (please note that the tax basis and book amounts are equivalent):

ABC Partnership Balance Sheet – January 1^st

Assets   :                                                                                               Liabilities:

Tax Basis/Book                    FMV                  

Cash                                     $340,000                             $340,000      $150,000

Acct. Receivable                $75,000                               $60,000

Inventory                             $90,000                            $150,000

Machinery                           $55,000                            $100,000

Land                                     $340,000                            $400,000

Stock                                      $90,000                            $300,000

Goodwill                                      $0                              $300,000

Total                                     $990,000                          $1,650,000

                               Capital Accounts/Equity

                               Tax/Book                                 FMV

Amy                       $280,000                              $500,000

Shannon              $280,000                              $500,000

Cameron             $280,000                              $500,000

Total                    $840,000                          $1,500,000

Assume that the Company purchased the machine three years ago for $120K and that the land ten years ago and it is being held for investment purposes and that the Company has never previously made an election under IRC sec. 754.

If Amy sells her interest to Laura for $500K on January 1^st, what are the tax consequences to Amy? What are the tax consequences to Laura?