The December 31, 2019 balance sheet of the JKL Partnership appears below:

Adjusted Fair Market

Basis Value

Cash $310,000 $310,000

Receivables 0 60,000

Capital assets 170,000 410,000

$480,000 $780,000

Jim, Capital $160,000 $260,000

Kim, Capital 160,000 260,000

Lynn, Capital 160,000 260,000

$480,000 $780,000

Each partner shares in 1/3 of the partnership capital, income, gains, losses, deductions and credits. The partnership provides consulting services to its clients (capital is not a material income-producing factor). On December 31, 2019, General Partner Lynn receives a distribution of $270,000 cash in retirement of her partnership interest. Nothing is stated in the partnership agreement about goodwill.

Required:

1. Assuming that Lynns outside basis for the partnership interest immediately before the distribution was $160,000, determine the amount and nature of her gain from the distribution.
2. What tax consequence does the $270,000 payment to Lynn have for the partnership?
3. What action or planning opportunity should the partnership consider and what effect would that action have?