Consider the following balance sheet for DEF Partnership.

Basis FMV

Assets:

Cash $ $60,000$ $ $60,000$

Receivables $-0-60,000$

Land A $10,00020,000$

Land B $10,00020,000$

Land C $10,00020,000$

Total $90,000180,000$

Liabilities $00$

Partner$$s Capital:

Capital $$ Daniel $30,00060,000$

$-$ Edward $30,00060,000$

$-$ Frances $30,00060,000$

Total $90,000180,000$

Note: Land A$,$ B$,$ and C are Sec. $1231$ property, and each partner$$s outside basis is $$30,000.$

Suppose Daniel wishes to exit the partnership completely. After discussion with Edward and Frances, the partners agree to let Daniel choose on of the following three options:

$1.$ Daniel takes a liquidating distribution of $$60,000$ cash.

$2.$ Daniel takes a pro rata liquidating distribution of $$20,000$ cash, $$20,000$ receivables, and land A $($FMV $=$ $$20,000).$

$3.$ Daniel sells his entire partnership interest to Doris for $$60,000.$

Required:

A$.$ Determine the tax consequences to Daniel of each option, including gains $($losses$),$ realized, recognized and deferred; character of gains $($losses$)$; and basis of assets.

B$.$ Discuss the relative merits of each option to Daniel. That is$,$ what are the advantages or disadvantages of each option? What factors could sway your recommendation one way or the other?