TA, B, C, and D formed the calendar-year ABCD Partnership, each with a one-fourth interest in the capital, profits, and losses of the partnership. The original contributions to ABCD were $10 in cash from each partner. The partnership has neither earned any income nor received additional contributions. The partnership uses an accrual method for the purchase and sale of inventory and the cash method for all other purposes. In addition to producing inventory assets for sale, the partnership renders consulting services to some of its customers. None of A, B, C, or D has activities outside of the partnership that could cause any of the partnership's assets to be considered inventory under S 751 (d) (3). The balance sheet of ABCD is as follows: Tax Fair Market Value Assets Cash Accounts Receivable (from services) Inventory Stock (investment) Land (investment) $ 20 20 160 20 $220 $ 20 25 25 160 70 $300 Total Liabilities Mortgage Capital $180 $180 30 30 30 30 10 Total Liabilities and Capital $220 $300 a. E offers A $30 cash for A's interest in ABCD. If A accepts E's offer, what is the amount and character of A's gain or loss? b. How would your answer in a. above change if ABCD were an ac- crual-method taxpayer for all items? c. How would your answer in a. above change if the partnership's adjusted basis in the inventory were $22? $30? (In order to maintain equality between aggregate inside basis and aggregate outside basis, assume that A's basis in his partnership interest is $55.50 in the former case and $57.50 in the latter.) What if the partnership's adjusted bases in the accounts receivable and the inventory were $25 and $40, respectively (and A's basis in his partnership interest were $66.25)? d. How would your answer in a. above change if A were a dealer in real estate? TA, B, C, and D formed the calendar-year ABCD Partnership, each with a one-fourth interest in the capital, profits, and losses of the partnership. The original contributions to ABCD were $10 in cash from each partner. The partnership has neither earned any income nor received additional contributions. The partnership uses an accrual method for the purchase and sale of inventory and the cash method for all other purposes. In addition to producing inventory assets for sale, the partnership renders consulting services to some of its customers. None of A, B, C, or D has activities outside of the partnership that could cause any of the partnership's assets to be considered inventory under S 751 (d) (3). The balance sheet of ABCD is as follows: Tax Fair Market Value Assets Cash Accounts Receivable (from services) Inventory Stock (investment) Land (investment) $ 20 20 160 20 $220 $ 20 25 25 160 70 $300 Total Liabilities Mortgage Capital $180 $180 30 30 30 30 10 Total Liabilities and Capital $220 $300 a. E offers A $30 cash for A's interest in ABCD. If A accepts E's offer, what is the amount and character of A's gain or loss? b. How would your answer in a. above change if ABCD were an ac- crual-method taxpayer for all items? c. How would your answer in a. above change if the partnership's adjusted basis in the inventory were $22? $30? (In order to maintain equality between aggregate inside basis and aggregate outside basis, assume that A's basis in his partnership interest is $55.50 in the former case and $57.50 in the latter.) What if the partnership's adjusted bases in the accounts receivable and the inventory were $25 and $40, respectively (and A's basis in his partnership interest were $66.25)? d. How would your answer in a. above change if A were a dealer in real estate
