At the begining of the current year, Able and Baker formed rhe AB partnerhsip. Each had 50% interest, Able transferred property with FMV of $50,000 and basis of $30,000 adjusted basis., subject to a $10,000 liability, which the partnership assumed. Baker contributed $40,000 cash. The partnership also borrowed $28,000 from the bankto use in its operations. All liabilities are recourse for which the partners have an equal economic risk of loss. During the current year, the partneship earned $24,000 of net ordinary income and reinvested this amount in new property.

a. What is the partnership's and each partner's gain or loss recognized on the formation of the partnership?

b, What is each partner's basis in his or her partnerhsip interest at the end of the current year?

c. Assume instead that Able and Baker formed a corporation rather than a partnership. How would your answers to a and b change?