The PQRS Partnership owns the following assets on December 30 of the current? year:

Assets	Partnership's Basis	FMV
Cash	$20,000	$20,000
Receivables	0	40,000
Inventory	80,000	100,000
Total	$100,000	$160,000

The partnership has no? liabilities, and each? partner's basis in his or her partnership interest is $25,000.On December 30 of the current? year,Paula receives a current distribution of inventory having a $10,000 FMV, which reduces her partnership interest from? one-fourth to? one-fifth.

Requirement

What are the tax consequences of the distribution to the? partnership,Paula?,and the other? partners?

			Paula's	Paula's
		Beginning	Interest Before	Interest After	Hypothetical
		Partnership	Distribution	Distribution	Proportionate	Actual
		Amount	(1/4)	(1/5)	Distribution	Distribution	Difference
Sec. 751 assets:
Total Sec. 751 assets
Non-Sec. 751 assets:
Total non-Sec. 751 assets