Bob and Kate form the BK Partnership, a general partnership, as equal partners. Bob contributes an office building with a $130,000 FMV and a $95,000 adjusted basis to the partnership along with a $60,000 mortgage, which the partnership assumes. Kate contributes the land on which the building sits with a $50,000 FMV and a $75,000 adjusted basis. Kate will manage the partnership for the first five years of operations but will not receive a guaranteed payment for her work in the first year of partnership operations. Starting with the second year of partnership operations, Kate will receive a $10,000 guaranteed payment for each year she manages the partnership. What tax issues should Bob,

Kate, and the BK Partnership consider with respect to the formation and operation of the partnership?