ABC, LLP is formed. Able contributes cash of $50,000 for his 1/3 share. Betty contributes land (fmv $50,000, basis $20,000) for 1/3 share. Charlee contributes services worth $50,000. Explain the tax consequences to the partners and partnership.

Follow up on # 1. After the partnership was established it borrowed $30,000 and then had $60,000 of taxable income at the end of the year. In year 2, the partnership distributed $10,000 in cash to each partner. Explain the tax consequences to each partner from these transactions