Honeymooner is a calendar year general partnership whose partners, Kramden and Norton, share equally in the profits, losses and capital. Kramden and Norton founded the partnership several years ago and funded the partnership with cash contributions. As of December 31, 2003, the partnership had the following balance sheet:

Description	Tax Basis	Fair Market Value
Cash	$30,000	$30,000
Inventory	$10,000	$50,000
Equipment	$20,000	$70,000
Land Held for Investment	$120,000	$10,000
Totals	$180,000	$160,000
Capital
Kramden	$90,000	$80,000
Norton	$90,000	$80,000
Totals	$180,000	$160,000

1) For this question and question number 10 only, assume that instead of a liquidation of Honeymooner or a redemption of Kramden’s interest, Kramden sells his entire partnership interest to Alice for $80,000; what gain or loss does Kramden recognize and what is the character of such gain or loss assuming that the purchase price was allocated based on the above values under arm’s length negotiations?

2) What is Alice’s tax basis in her partnership interest and if Honeymooner has an IRC Section 754 election in effect, what basis adjustments must Honeymooner make on the sale of the interest from Kramden to Alice and to what assets are such adjustments allocated?