56. Elaine pays $40,000 cash for Martha’s onethird interest in the Lakewood Partnership.

Just prior to the sale, Martha’s basis in Lakewood is $140,000. Lakewood reports the following balance sheet:

Tax Basis FMV Assets Cash $ 50,000 $ 50,000 Land 370,000 70,000 Totals $420,000 $120,000 Liabilities and capital Capital— Mary 140,000

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Martha 140,000

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Margaret 140,000 Totals $420,000 Assume the land had been purchased several years ago and the partnership does not have a

§754 election in place.

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

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

c. If Lakewood were to sell the land for $70,000 shortly after the sale of Martha’s partnership interest, how much gain or loss would Elaine recognize?