BDD Partnership is a service-oriented partnership that has three equal gen- eral partners. One of them, Barry Evans, sells his interest to another partner, Dale Allen on December 31 of the current tax year, for $90,000 cash and the assumption of Barrys share of partnership liabilities. (Liabilities are shared equally by the partners.) Immediately before the sale, the partnerships cash basis balance sheet is as shown below. Assume that the capital accounts before the sale reflect the partners bases in their partnership interests, excluding liabilities. The payment exceeds the stated fair market value of the assets because of goodwill that is not recorded on the books.

a. What is the total amount realized by Barry on the sale?

b. How much, if any, ordinary income must Barry recognize on the sale?

c. How much capital gain must Barry report?

d. What is Dales basis in the partnership interest acquired?

e. Refer to Reg. 1.751-1(a)(3). What information is the seller required to provide?

Draft a statement that meets these requirements.

Basis FMV Basis FMV Cash Accounts receivable Capital assets $120,000 120,000 Note payable 30,000 30,000 0 90,000 Capital accounts 30,000 75,000 Barry 85,000 85,000 85,000 150,000 $285,000 40,000 40,000 40,000 David Dale Total 150,000 $285,000 Total