Sean,Penelope,and Juan Formed the SPJ Partnership by Each Contributing Assets

question 92

Essay

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?

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Definitions:

Meat Powder

Ground or finely divided meat used in various contexts, including as a food ingredient or in laboratory settings as a stimulus in the study of animal behavior.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Tone

can refer to the quality or character of sound, or in linguistics, the use of pitch in language to distinguish lexical or grammatical meaning.

Salivation

The secretion of saliva in the mouth, which is stimulated by the presence or anticipation of food and aids in digestion.