Diana, a partner in the cash basis HDA Partnership, has aone-third interest in partnership profits and losses. Thepartnership's balance sheet at the end of the current year is asfollows: Basis FMV Basis FMV Cash $120,000 $120,000 Hannah, capital$90,000 $250,000 Receivables 0 240,000 Diana, capital 90,000250,000 Land 150,000 390,000 Alexis, capital 90,000 250,000 Total$270,000 $750,000 Total $270,000 $750,000 Diana sells her interestin the HDA Partnership to Kenneth at the end of the current yearfor cash of $250,000. a. How muc income must Diana report on hertax return for the current year from the sale? What is its nature?b. If the partnership did make an optional adjustment-to-basiselection, what are the type and amount of income that Kenneth mustreport in the next year when the receivables are collected? c. Ifthe partnership did make an optional adjustment-to-basic election,what are the type and amount of income that Kenneth must report inthe next year when the receivables are collected? When theland(which is used in the HDA Partnership business) is sold for$420,000? Assume that no other transactions occurred that year.
