In $2021,$ Sean Caldwell decided to sell his $35\%$ interest in capital and profits of Boscelli

Partnership to Ryan Peters for $$31,000.$ At the time of the sale, Sean$$s basis in the partnership

interest was $$21,875.$

At the time of the sale, the partnership$$s books appeared as follows:

Assets Basis Fair Market Value

Cash $$15,000$ $$15,000$

Receivables $0$ $$12,500$

Inventory $$25,000$ $$28,000$

Machinery $$17,500$ $$25,000$

Real Estate $$5,000$ $$19,500$

Liabilities & Capital Accounts

Capital Account$-$Sean $$21,875$ $$35,000$

Capital Account$-$other $$40,625$ $$65,000$

If the real estate or machinery would have been sold at that time, all of the gain would be

characterized as Sec. $1231$ or capital.

The partnership had a valid Sec. $754$ election in effect at the time of the sale.

In a short document, share your calculations. Write what you have determined to be the impact of the election on the basis of each asset. Briefly describe $($in one or two sentences$)$ why this basis adjustment exists $($i$.$e$.,$ what is its purpose$).$ State why a partnership might choose not to have the election in effect.