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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

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 con-tributes 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 guar-anteed 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?

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