Timothy is a 35 percent partner in the Total Partnership, a calendar-year-end entity. Timothy has an outside basis in his interest in Total of $198,000, which includes his share of the $45,000 of partnership liabilities. On December 31, Total makes a proportionate distribution of the following assets to Timothy:

	Basis	FMV
Cash	$50,000	$50,000
Inventory	65,000	75,000
Land	50,000	65,000
Totals	$165,000	$180,000

1. For an operating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.
2. For a liquidating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.
3. Discuss the similarities and differences between the tax consequences of the operating distribution and the tax consequences of the liquidation distribution.