Case Study. FDR Partners is a large regional partnership. This year Rusty acquir

Case Study. FDR Partners is a large regional partnership. This year Rusty acquired an interest in the firm by purchasing it from an existing partner. The firms balance sheet just prior to Rustys acquisition was as follows:Basis FMVCash 30000 30000Accounts Receivable 0 151000Building 150000 200000Land 32000 50000TOTAL ASSETS 212000 431000Liabilities 125000 125000Partners capital 87000 306000TOTAL LIABILITIES & CAPITAL 212000 431000Rusty paid $50000 for the newly purchased interest which represented a ten percent interest in the firm. The partnership does not currently have a Section 754 election in effect. Our firm has advised Rusty that the partnership should make a Section 754 election for his benefit. Review Reg. 1.754-1 and prepare a memorandum explaining how the Section 754 election is made and when it must be made in order to benefit Rusty. Also illustrate to Rusty the different tax consequences for him if the election is made vs. if it is not made.