55. Michelle pays $120,000 cash for Brittany’s one-third interest in the Westlake Partnership. Just prior to the sale, Brittany’s basis in Westlake is $96,000. Westlake reports the following balance sheet:

Tax Basis FMV Assets Cash $ 96,000 $ 96,000 Land 192,000 264,000 Totals $288,000 $360,000 Liabilities and capital Capital—Amy $ 96,000

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Brittany 96,000

—Ben 96,000 Totals $288,000

a. What is the amount and character of Brittany’s recognized gain or loss on the sale?

b. What is Michelle’s basis in her partnership interest? What is Michelle’s inside basis?

c. If Westlake were to sell the land for $264,000 shortly after the sale of Brittany’s partnership interest, how much gain or loss would the partnership recognize?

d. How much gain or loss would Michelle recognize if the land were sold for $264,000?

e. Suppose Westlake has a §754 election in place. What is Michelle’s special basis adjustment? How much gain or loss would Michelle recognize on a subsequent sale of the land in this situation?