The XYZ partnership (Xavier, Yolanda and Zeke) has been operating for several years. All of its assets were purchased by the partnership, and at the end of the current year its balance sheet, which has been expanded to show the current fair market value of assets and capital, is as follows:

Assets Liabilities & Capital AB/Book FMV Liabilities Cash $600 $600 None Accts. Rec. 0 200 Equipment 100 200 Stock 500 1000 Land 300 1000 Total $1500 $3000 Capital Accounts Tax/Book FMV Xavier $500 $1000 Yolanda 500 1000 Zeke 500 1000 $1500 $3000

On the last day of the current year, Wilma joins the partnership. In exchange for a contribution of $1000 cash, he receives a 25% interest in partnership profits, losses, and capital. (a) Reconstruct the balance sheet of the partnership following Wilmas admission to the partnership, assuming, in the alternative: 1. The partnership does not elect to revalue its assets under Reg. 1.704- 1(b)(2)(iv)(f), or 2. The partnership does elect to revalue its assets under the regulations. (b) If Wilma had purchased Xaviers interest in the partnership instead of acquiring an interest through a contribution to the partnership, would the partnership be permitted to revalue its assets under the regulations? Why or why not?

Please provide correct answer and detailed explanation. Thank you!