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accord with section 743(b) prior to a distribution to a partner
who acquired his interest in the absence of a section 754
election, if three conditions exist: (1) The fair market value
of the partnership's property (other than money) exceeds 110
percent of its adjusted basis to the partnership at the time the
partnership interest was acquired, (2) upon liquidation of the
partner's interest in the partnership immediately after
acquisition, an allocation of basis under section 732(c) would
have shifted basis to depreciable, depletable, or amortizable
property from property not subject to these allowances, and (3) a
special basis adjustment under section 743(b) would have changed
the basis to the transferee partner of property actually
distributed. Sec. 1.732-1(d)(4), Income Tax Regs.; see Rudd v.
Commissioner, 79 T.C. 225, 240-246 (1982).
The partnership did not have a section 754 election in
effect for 1984. Up to this point, the parties remain in accord.
Their disagreement goes to the amount of the fair market value of
the player contracts and whether the section 732(d) provisions
applied.
The partnership's accountant determined that the section
732(d) mandatory basis adjustment rules applied, and the player
contract bases were adjusted in accord with section 743(b) prior
to the deemed distribution. The partnership used the section
743(b) adjusted basis, i.e., their purported fair market values,
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