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

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:

Assuming that Lynn’s outside basis for the partnership interest immediately before the distribution was $160,000, determine the amount and nature of her gain from the distribution.

What tax consequence does the $270,000 payment to Lynn have for the partnership?

What action or planning opportunity should the partnership consider and what effect would that action have?  

Adjusted Fair Market Basis Value Cash S310,000 $310,000 Receivables 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 S480,000 $780,000