1. The ABC equal partnership has the following balance sheet:

Assets Partners Capital

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

Cash $6,000 $6,000 A $3,000 $6,000

Accounts Receivable 0 3,000 B 3,000 6,000

Capital Asset 3,000 9,000 C 3,000 6,000

$9,000 $18,000 $9,000 $18,000

The partnership distributes the accounts receivable to A in an operating distribution. After the distribution, A has one-fifth interest worth $3,000 in the remaining partnership assets.

1. What results to A, B, C and the partnership as a result of the distribution? Reconstruct the partnership balance sheet at the end of the transaction.
2. If the distribution results in an increase to the partnerships inside basis, how should that increase be allocated?