Lily is selling her entire 50% partnership interest in the Lilac Partnership. Lilacs assets consist solely of an item of depreciable equipment with a fair market value of $2,000, and Lily is selling her partnership interest for $1,000. The original cost to the partnership for the equipment is $3,000 and the partnership has taken $1,400 of depreciation. Which of the following statements is true? Question 1 options:

1) The sale gives rise to an ordinary gain of $200 for Lily.

2) The partnership has unrealized receivables of $400.

3) Lily will recognize a capital gain $200.

4) Both a and b are true.

5) Both b and c are true.

Sally is selling her entire interest in the LG Partnership to Bob for $5,000. The inside basis for Sallys interest is $3,500. If LG makes an election under 754, the following is true regarding the 743(b) adjustment.

Question 4 options:

1)	The partnership will record additional tax basis of $1,500 in its assets.

2)	Bob will obtain additional basis in the partnership assets of $1,500.

3)	Both a and b are true.

4)	Neither a nor b are true.