Jeremy sold his 40% interest in the HIJ Partnership to Ashley for $400,000. The inside basis of all partnership assets was $600,000 at the time of the sale. If the partnership makes a § 754 election, it will record a $160,000 step-up in the basis of the partnership assets, and the step-up will be attributed solely to Ashley.

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The step-up in basis is calculated as the difference between the purchase price for the partnership interest ($400,000) and the selling partner's share of the inside basis in the partnership assets before the sale (40% of $600,000 = $240,000), which equals $160,000. A § 754 election allows the partnership to adjust the basis of its assets, and this adjustment is attributed solely to the purchasing partner, Ashley, in this case.

Jeremy Sold His 40% Interest in the HIJ Partnership to Ashley