Question - 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:
Partnership's Basis FMV
Assets:
Cash $75,000 $75,000
Land $225,000 $325,000
Total $300,000 $400,000
Partners' capital
Jerry $75,000 $100,000
Instrument Corp $75,000 $100,000
Logo Corp $75,000 $100,000
Lighthouse Corp $75,000 $100,000
Total $300,000 $400,000
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?