Assume a partnership makes a distribution of inventory to an 80% owner. The partnership purchased the inventory for $500,000. At the time of the distribution, the inventory has a FMV of $200,000. The partners outside basis is $440,000.

a. What is the tax result to the partnership and the partner on this distribution if it were a non-liquidating distribution? There is no gain or loss recognized by the partnership or partner. b. What is the tax result to the partnership and the partner on this distribution if it were a liquidating distribution?