ACCT 616 Week 5 Case Study 3 Example

Reviewed by Thomas Kerrigan, MBA, CPA · Liberty University · Updated

This ACCT 616 Week 5 sample case study follows a buyer who pays $120,000 for a one-third interest in a partnership holding land with $150,000 of unrealized appreciation. Without an election, the buyer would be taxed on a third of that gain when the partnership sells, although the price already reflected it. The paper computes the buyer's outside basis and share of inside basis, the $50,000 adjustment Section 743(b) allows once Section 754 is elected, and its allocation under Section 755, then weighs the election's later costs, since it binds the partnership for good. A Psalm on keeping one's word frames that permanence. For MS in Accounting students, Liberty University ACCT 616 makes this 100-point case the only assignment of Module/Week 5.

CourseACCT 616 Advanced Topics in Individual and Pass-through Taxation (ACCT616)
Module/Week5
AssignmentCase Study 3
Paper typeCase study
Lengthabout 493 words, 2 double-spaced pages plus title page and references. Course guide: up to two pages applying Sections 743, 754 and 755 to a purchased interest, set out in APA style with title page, running head and a list of at least 2 professional sources not counting the textbooks and Bible
FormatAPA 7 student paper
Points100
SchoolLiberty University Online
ProgramMS in Accounting
Where it sitsModule/Week 5 in Liberty's published ACCT 616 course guide; current sections can differ
UpdatedOctober 2026

Free sample paper for ACCT 616 Week 5

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Buying Into a Partnership With Appreciated Land: The Section 754 Election and the Buyer's Basis Adjustment

 

[Student Name]

School of Business, Liberty University

ACCT 616: Advanced Topics in Individual and Pass-through Taxation

Case Study 3

[Instructor Name]

[Date]

 

The partnership, partners and figures are a composite written for this sample; the Code sections, regulations and Bible passage cited are real.

Why this part earns its pointsThe facts give each asset's value and basis, because the adjustment is measured against both.
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Buying Into a Partnership With Appreciated Land: The Section 754 Election and the Buyer's Basis Adjustment

The Facts

Harbor Point Partners has three equal partners and no liabilities. Its holdings are $60,000 in the bank and one tract of land worth $300,000 with a basis of $150,000, so its assets are worth $360,000 and have a combined basis of $210,000. On January 1, 2026, Ava Chen buys partner Leo Brandt's one-third interest for $120,000.

Why this part earns its pointsThe two bases are computed side by side so the gap is visible.
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Two Different Bases

Because Ava bought her interest, her outside basis is its cost, $120,000 (I.R.C. § 742, 2025). Her share of the partnership's inside basis is measured by a hypothetical sale of all its assets at fair value: she would receive $120,000 of cash and be allocated $50,000 of gain, so her share of previously taxed capital, and of inside basis, is $70,000 (Treas. Reg. § 1.743-1, 2025). The two bases differ by $50,000. On the other side of the sale, Leo, whose own basis was $70,000, reports $50,000 of capital gain; because the partnership holds no unrealized receivables or inventory, none of it is recast as ordinary income (I.R.C. § 751, 2025).

The Problem Without an Election

If the partnership sells the land for $300,000, it recognizes $150,000 of gain, and Ava is allocated $50,000 of it even though she paid full value for her share of the appreciation. Her outside basis would rise to $170,000, and she would recover the excess only as a capital loss when she leaves the partnership, perhaps decades later. Without the election, the buyer pays tax on gain that belonged to the seller.

The Election and the Adjustment

If the partnership elects under Section 754, a transferee's share of inside basis is increased by the excess of the transferee's outside basis over that share, here $50,000, and the increase belongs to Ava alone (I.R.C. § 743, 2025). Section 755 assigns the adjustment to the assets whose values exceed their bases, so all $50,000 attaches to the land (I.R.C. § 755, 2025). On a later sale, Ava's $50,000 share of gain is offset by her $50,000 adjustment, and she reports none. The election is made by a written statement attached to the partnership's timely filed return for the year of the transfer (Treas. Reg. § 1.754-1, 2025).

Why this part earns its pointsThe costs of the election are weighed before the recommendation.
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What the Election Costs Later

The election applies to every later transfer and to distributions under Section 734(b), and it can be revoked only with IRS consent (I.R.C. § 754, 2025). If values fall, future buyers' adjustments would be downward, and the partnership must keep separate basis records for each transferee. For three partners and one parcel, those costs are small. A downward adjustment would in any case be required, election or not, if the partnership ever had a substantial built-in loss, more than $250,000, when an interest changed hands (I.R.C. § 743, 2025).

Recommendation

The Psalm commends the person who keeps an oath even when it hurts (English Standard Version Bible, 2001/2016, Psalm 15:4). The partners should make the election knowing it binds them in bad years as well as good, and should agree in the partnership agreement that any partner who later buys or sells will share the record-keeping cost.

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References

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

I.R.C. § 742 (2025).

I.R.C. § 743 (2025).

I.R.C. § 751 (2025).

I.R.C. § 754 (2025).

I.R.C. § 755 (2025).

Treas. Reg. § 1.743-1 (2025).

Treas. Reg. § 1.754-1 (2025).

What the ACCT 616 Week 5 instructions ask

Nothing else is graded in ACCT 616's fifth module/week, so Case Study 3 gets the week to itself, along with chapters 11 and 12 of Ricketts and Tunnell and a presentation. The facts are set out in the instructions. Students write one or two pages in current APA style, a title page with its running head first and the references last, and the reference list has to reach at least two scholarly or professional sources apart from the course texts and Scripture. A transfer of an interest is the natural case for the midpoint of the course, because it asks how the partnership's inside basis and a new partner's outside basis can fall out of step, and what the partnership can do to bring them back together.

How this ACCT 616 Week 5 example is built

The sample begins with a short table-free statement of the partnership's assets at value and basis, then the sale. A first section computes the buyer's cost basis in the interest and the buyer's share of the partnership's basis in its assets, showing why they differ by $50,000. A second section shows the problem: when the land is sold, the buyer is allocated gain that was already paid for. A third section explains the cure, the Section 754 election and the Section 743(b) adjustment, and assigns the adjustment to the land under Section 755. A fourth weighs the costs of an election that cannot be dropped at will, including downward adjustments on later distributions, before a short closing recommendation framed by the Psalm.

ACCT 616 Week 5 grading rubric: where the points go

For this case, instructors look first at three numbers: the buyer's outside basis, the buyer's share of inside basis and the size of the basis adjustment, each traced to its Code section or regulation. Next comes the allocation of the adjustment among the partnership's assets and an accurate account of how and when the election is made. Points also go to judgment, a recommendation that weighs the permanence of the election and its effect on future distributions rather than treating it as free. The paper still has to fit in two pages, follow APA in its small details and list two or more professional or scholarly sources that are not the course books.

ACCT 616 Week 5 help: mistakes that cost points

Begin with what the buyer paid, since a purchased interest takes a cost basis, and then compute the buyer's share of the partnership's inside basis the way the regulations do, through a hypothetical sale of every asset at value. The difference is the Section 743(b) adjustment, which belongs to the buyer alone, not to the other partners. Allocate it to the assets whose values differ from their bases, using Section 755. Explain how the election is made, with a statement attached to the partnership's timely return for the year of the transfer, and that it then applies to all later transfers and distributions. Weigh that permanence before recommending it, and remember that a large built-in loss can make an adjustment mandatory.

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ACCT 616 Week 5 questions, answered

What is ACCT 616 Case Study 3?

The 100-point third case study and the only graded task in Module/Week 5, a one-to-two-page APA analysis of a partnership scenario that rests on the Code and Treasury regulations.

Where can I find a free ACCT 616 Week 5 sample paper?

A complete ACCT 616 Week 5 case study sample appears here, computing a buyer's Section 743(b) adjustment after a Section 754 election and weighing what the election costs later.

What does a Section 754 election do?

It lets a partnership adjust the basis of its assets when an interest is sold or when it makes certain distributions, so the buyer's share of inside basis matches what the buyer paid.

Can a partnership revoke a Section 754 election?

Not freely. The election applies to the year it is made and every later year, and it can be revoked only with the consent of the IRS, so it should be weighed before it is made.

What is read in ACCT 616 Module/Week 5?

Chapters 11 and 12 of Ricketts and Tunnell with a presentation; no quiz or forum falls that week, so the case study is its only graded work.

Use it as a model, or ask for your own

This paper is an original model written by our desk for study. It is not a submitted student paper and not an official Liberty University document. Read it for structure and reasoning, then write your own to the instructions in your Canvas course. If you want a version built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.

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