At the beginning of the current year, Fabian and Euler formed the FE Partnership by transferring cash and property to the partnership in exchange for a partnership interest, with each having a 50% interest. Specifically, Fabian transferred property having a 55,000FMV, a 40,000 adjusted basis, and subject to a 11,000 liability, which the partnership assumed. Euler contributed 70,000 cash to the partnership. The partnership also borrowed 29,000 from the bank to use in its operations. All liabilities are recourse for which the partners have an equal economic risk of loss. During the current year, the partnership earned 23,000 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? At this point I have determined the answer to A is zero gain recognized by all three parties. I need help with the remaining: B through D.

B. What is each partner's basis in his or her partnership interest at the end of the current year?

C. For the partnership, prepare a tax and book balance sheet at the end of the current year.

D. Assume instead that Fabian and Euler formed a corporation rather than a partnership. What is the corporation's and each shareholder's gain or loss recognized on the formation of the corporation? What is each shareholder's basis in his or her stock at the end of the current year?