On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows. Adjusted Basis Fair Market Value From Fenton: Cash $100,000 $100,000 Accounts receivable 0 180,000 Inventory 50,000 125,000 From Myers: Land 455,000 405,000 FM originally intended to hold the inventory as investment property. Myers held the land as long-term investment property, but FM will use it in its business as a 1231 asset. Within 30 days of formation, FM collects the receivables. Two years later, FM sells the inventory contributed by Fenton for $125,000 cash. After three years, FM sells the land for $405,000 FM realized the following income in the current year from these transactions: from collecting cash basis accounts receivable. from sale of inventory. of of For the land sale, FM recognizes a s These rule exists to ensure that a partner and partnership inherent character of the underlying deferred income, gain, loss, or deduction property between themselves and alter the