Question - A partnership is owned 30% by G, 10% by G's daughter, 20% by G's wife's brother (i.e., the uncle of G's daughter), and 40% by X Corporation, in which G's wife (i.e., the mother of G's daughter) is a 20% shareholder. In Year 4, G's daughter acquires from the partnership land that the partnership has held as inventory. The partnership had held the land for more than one year, and, at the time of the land's acquisition by G's daughter, the partnership had an inside basis in the land of $60,000. To acquire the land in Year 4, G's daughter paid the partnership $30,000, an amount equal to the land's Year 4 fair market value. In Year 6, G's daughter sells the land she acquired from the partnership, which land she held as an investment, for $45,000. As additional background information, in Year 4, G's daughter has an outside basis in her partnership interest of $90,000, and the partnership has not made an IRC § 754 election. Be sure to Indicate which IRC codes are being referenced in each question below.
1. What are the tax consequences to the partnership in Year 4 following the acquisition of the land by G's daughter?
2. What are the Year 6 tax consequences to G's daughter when she sells the land for $45,000?
3. How does your answer to Question 1 change, if at all, if G's wife is an 80% shareholder of X Corporation instead of a 20% shareholder?
4. Given your answer to Question 3, how does your answer to Question #14 change, if at all, when G's daughter sells the land for $45,000?