Linda pays $100,000 cash for Jerry's ¼ interest in the JILL Partnership. The partnership has a Sec. 754 election effect. Just before the sale of Jerry's interest, JILL's balance sheet appears as follows:
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Partnership's Basis
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FMV
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Assets:
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Cash
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$75,000
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$75,000
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Land
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$225,000
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$325,000
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Total
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$300,000
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$400,000
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Partners' capital
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Jerry
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$75,000
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$100,000
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Instrument Corp
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$75,000
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$100,000
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Logo Corp
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$75,000
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$100,000
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Lighthouse Corp
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$75,000
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$100,000
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Total
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$300,000
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$400,000
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a. What is Linda's total optional basis adjustment?
b. If JILL Partnership sells the land for its $325,000 FMV immediately after Linda purchases her interest, how much gain or loss will the partnership recognize?
c. How much gain will Linda report as a result of the sale?