discussion how to apply the rules for the tax treatment of discontinuation in a partnership.

1:What is a Code Sec. 736(b) payment? How are Code Sec. 736(b) payments treated?
2:The XYZ partnership had the following balance sheet:

	Basis	FMV
Cash	$30,000	$30,000
Accounts Receivable	$0	$48,000
Land	$36,000	$93,000
Goodwill	$0	$15,000
	$66,000	$186,000
Capital, X	$22,000	$62,000
Capital, Y	$22,000	$62,000
Capital, Z	$22,000	$62,000
	$66,000	$186,000

X receives a payment of $62,000 cash upon his retirement from the partnership. X was a general partner, capital was not a material income-producing factor for the partnership, and the partnership agreement said nothing about making payments to a retiring partner for their share of goodwill. How would the retirement payment be treated by X and the partnership?
3:The XYZ partnership had the following balance sheet:

	Basis	FMV
Cash	$30,000	$30,000
Accounts Receivable	$0	$48,000
Land	$36,000	$93,000
Goodwill	$0	$15,000
	$66,000	$186,000
Capital, X	$22,000	$62,000
Capital, Y	$22,000	$62,000
Capital, Z	$22,000	$62,000
	$66,000	$186,000

In liquidation of his interest, X receives a distribution equal to 50% of partnership income for each of the first two years after his retirement. Partnership income was $80,000 in each of those years. X was a general partner, capital was not a material income-producing factor for the partnership, and the partnership agreement specified that a retiring partner would be paid for their share of goodwill. How would the retirement payment be treated by X and the partnership?

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