Several years ago, Amy, Bob, and Carol formed a partnership that operates a marina in Florida. Carol is ready to retire. Three options are being considered:

Option 1: Sell the business and distribute part of the proceeds to each partner.

Option 2: Borrow money to pay for Carols interest in the business.

Option 3: Ask Carol to find an outside buyer for her interest in the business.

For each option, describe the tax consequences for the partnership and the partners. If Carol should die before the plan is executed, how would each option be affected?