Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000. In the following year, Penelope sold her one-third interest to Pedro for $225,000. At the time of the sale, the SPJ partnership had the following balance sheet: 
Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the sale to Pedro and the partnership (1)assuming there is no Section 754 election in place, and (2)assuming the partnership has a valid Section 754 election?
Definitions:
Liability Limitation
A provision or agreement that limits the amount of compensation that can be claimed in the event of damage or loss.
Business Organizations
Business organizations are entities set up for the purpose of carrying out commercial enterprise, encompassing various forms like corporations, partnerships, and sole proprietorships.
Dissolution Agreement
A legal contract that outlines the terms under which a partnership or corporation formally ends its business operations and distributes its assets.
Board of Directors
A group of individuals elected by shareholders to govern and make major decisions for a corporation.
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