Jim Dunn, Amy Lauersen, and Tony Packard have agreed to form a partnership. In return for a 30% capital interest, Dunn transferred machinery (basis $268,000, fair market value $400,000) subject to a liability of $100,000. The liability was assumed by the partnership. Lauersen transferred land (basis $450,000, fair market value $300,000) for a 30% capital interest. Packard transferred cash of $400,000 for the remaining 40% interest. Compute the initial values of Dunn’s:
a. Basis in his partnership interest for tax purposes.
b. Capital account for financial reporting purposes.