1-Amy, Barry and Carla form the equal ABC Partnership on January 1 of the current year. The contributions are as follows:

Amy: Cash 30,000

Barry: Property basis 30,000 and FMV 45,000 subject to a 15,000 mortgage which the partnership assumes.

Carla: Property basis 35,000 and FMV 30,000.

How much gain or loss will each partner recognize on the transfer? According to what tax code section is the transfer governed by?

What basis does each partner take in the partnership after the transfers?

What is ABC Partnerships basis in the Property transferred by Barry?

2-

Nancy is a 50% partner in the Nancy and Peter partnership. The partnership received 300,000 from services and paid the following expenses:

Rent 80,000

Salaries 50,000

Guarantee to Nancy 60,000

Distributions to Peter 30,000

Guarantee to Peter 20,000

Municipal interest income 10,000

Interest expense on loan to purchase municipal bonds 4,000

Liabilities at 12/31 40,000

How much is Nancys AGI increased from the partnership items of income and deduction? How are the items of income or deduction reported to Nancy? (ordinary or separately stated items?)

Nancys basis at the beginning of the year (without liabilities) was 100,000. What is her basis at 12/31 ?

Discuss the concept of inside and outside basis.