In each of the problems below, the ABC partnership has three equal partners, A, B, and C and the following balance sheet:

Assets Partners Capital

A.B. F.M.V. A.B. F.M.V.

Cash $60,000 $60,000 A $30,000 $45,000

Receivables 0 15,000 B 30,000 45,000

Inventory 15,000 30,000 C 30,000 45,000

Goodwill 15,000 30,000

$90,000 $135,000 $90,000 $135,000

1. Partner A dies on the first day of the current year and, in an agreement arranged prior to his death, Services Partnership liquidates As general partnership interest for $45,000 of cash. What result to As estate is:

a. There is a specific provision in the agreement that $10,000 is for As interest in the goodwill and either a 754 or a 732(d) election is in effect?

b. The agreement is silent as to goodwill and neither a 754 nor a 732(d) election is in effect and the partnership is one in which capital is a material income-producing factor?

c. Prepare the partnerships balance sheet after the liquidation in Problem 1(a), above. See Reg. 1.734-2(b)(1).