C and D, both calendar year non corporate taxpayers, are equal partners in CD partnership, which had the following income and expenses during its business purpose calendar year which ended June 30 of the current year .

Gross Receipts inventory sales 250000

COGS -75000

Salaries to Non partners -25000

Depreciation -30000

Advertising -20000

Interest expense on investment margin account of CD -15000

Gain from sale of machine held for two years

1245 gain 20000

1231 gain 5000

Dividends 17500

Charitable Contributions -2000

Tax-exempt interest 1250

STCG stock 15000

LTCG stock 10000

LTCL stock -5000

1231 gain on casualty to machine held for two years 2500

(a) How and when will CD, C and D report the income and who will be liable for the taxes?

(b) Assume this is the first year of partnership operations, C's basis is $175,000 and D's basis is $100,000. What are the tax consequences to C and D from the first year of operations for CD? (Meaning: show combined vs. separately stated items and then show their bases change because of the ordinary and separately stated income items)

(c) What would be the result in (b) if the partnership elected to distribute $50,000 cash to each partner at the end of the year?