The Spirit Partnership owns the following assets on October 1 of the current year:

Assets Partnerships Basis FMV

Cash $30,000 $30,000

Receivables 0 16,000

Inventory 50,000 52,000

Supplies 6,000 6,500

Equipment* 9,000 10,500

Land 40,000 65,000

Total $135,000 $180,000

*Partnership has claimed $4,000 depreciation on the equipment

a. Which items are considered as unrealized receivables of the partnership?

b. Is the partnerships inventory substantially appreciated?

c. Assume the Spirit Partnership has no liabilities and that partner Betsys basis for her partnership interest is $33,750. On March 1 of the current year, Betsy receives a $20,000 current distribution in cash, which reduces her partnership interest from one-third to one-fourth. What are the tax results of the distribution (i.e., the amount and character of any gain, loss, or income recognized and Betsys basis in her partnership interest)?