BDD Partnership is a service-oriented partnership that has three equal general partners. One of them, Barry Evans, sells his interest to another partner, Dale Allen, on December 31 (the last day of the current tax year) for $90,000 cash and the assumption of Barry's share of partnership liabilities. (Liabilities are shared equally by the partners.)

Immediately before the sale (after reflecting operations for the year), the partnership's cash basis balance sheet was presented as shown below. 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.

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

How would Barry's tax result differ if, instead, BDD distributed $90,000 of its cash in liquidation of Barry's interest (with the remaining partners assuming Barry's share of partnership debt)? Why does this happen? The LLC's operating agreement does not address payment of goodwill to the partner.

Barry's gain would be $___________. It would be classified as $____________of ordinary income and $____________of capital gain.

The partnership may deduct the 736(a) payment of $____________