Greg, Alex, and Tom formed a general partnership in 2000 which they call Green Mountain Partners. Green Mountain Partners presently owns a bed and breakfast inn located in Quechee, Vermont. The property consists of a twenty-bedroom inn and spa complex, surrounded by twenty-five acres of wooded property with walking and riding trails. Greg and Alex each hold a 30 percent capital and profits interest in the partnership, while Tom holds a 40 percent capital and profits interest.

Greg holds an adjacent 30-acre piece of undeveloped land which he purchased in 1985 for

investment purposes for $350,000. The property presently has no mortgage or other encumbrances on it. Current fair market value of the property is approximately $2,100,000.

Greg, Alex, and Tom would like to subdivide Gregs adjacent property and build an active retirement community consisting of 80 single-family homes, a riding stable, indoor swimming pool and gym, plus a recreational center. They estimate that land development and building costs for each home will average about $275,000 each, and can be marketed for approximately $525,000 each.

Should greg contribute or sell the land?

• Which scenario would you advise Greg to use if he wants to defer his tax liability?
• Which scenario would you advise Greg to use if he needs cash for personal needs now