Consider the following balance sheet for DEF Partnership.
Note: Land A B and C are Sec. property, and each partner's outside basis is $
Suppose Daniel wishes to exit the partnership completely. After discussion with Edward and Frances, the partners agree to let Daniel choose on of the following three options:
Daniel takes a liquidating distribution of $ cash.
Daniel takes a pro rata liquidating distribution of $ cash, $ receivables, and land $
Daniel sells his entire partnership interest to Doris for $
Required:
A Determine the tax consequences to Daniel of each option, including gains losses realized, recognized and deferred; character of gains losses; and basis of assets.
B Discuss the relative merits of each option to Daniel. That is what are the advantages or disadvantages of each option? What factors could sway your recommendation one way or the other?
