The ABCD partnership has been operating for several years. Each partner has an equal interest in capital and profits. On January 1 of the current year, C sold his interest to E, and on July 1 of the current year, D sold her interest to F. At the time of both sales, the asset side of the partnership balance sheet was as follows: PROBLEM Cash Accounts Receivable Inventory 4,000 $4,000 8,000 8,000 8,000 12,000 $20,000$24,000 The partnership at no time had any liabilities and has never filed an election under S 754. At all relevant times, A and B each had a $4,000 basis for their respective partnership interests, and the bases of E and representing in each instance the price paid to C and D, respectively, we each $6,000. re Discuss the tax consequences to Partners A, B, E and F an partnership. Reconstruct the ABEF partnership balance sheet after DS d the D's sale in the following alternative situations: (a) Assume no elective basis adjustments. (b) Assume a S 754 election had been made by the partnership. (e) Assume no S 754 election had been made but E and F both invd s 732(d). 1. 1995-2 C.B. 313