Darrel, Sissy, and Carol form a partnership. Darrel and Sissy give equipment and a building, respectively. Carol agrees to perform all of the accounting and office work in exchange for a 10% interest.

Darrel's equipment:

FMV: $20,000

Basis: $100,000

Partnership: 60%

Sissy's building:

FMV: $100,000

Basis: $50,000

Partnership: 30%

Carol's services

FMV: $ 0

Basis: $ 0

Partnership: 10%

1. Which partners recognize any gain? If so, how much? Explain.
2. What is the basis for each partner in his or her partnership interest?