In 2021, Fred and Felix pooled their resources to form F&F Partnership. They will both work actively in the business and they have agreed to share profits and losses 50-50. To form this partnership, Fred contributed manufacturing equipment with a FMV of $1,000,000 and a basis of $100,000. Felix contributed $400,000 of cash and land with a fair market value of $800,000 and a basis of $500,000. The equipment contributed by Fred was not encumbered by debt. The land contributed by Felix had a $200,000 mortgage (qualified nonrecourse debt) which was assumed by F&F Partnership.

During 2021, F&F Partnership had non-separately stated loss (ordinary operating loss) of $(80,000), a long-term capital gain of $20,000. In 2021, they refinanced the $200,000 mortgage and now have a total of $250,000 of qualified non-recourse debt.

1. What items of income will Fred report on his 1040 return? What is Freds outside basis in his partnership interest at the end of 2021?

2. What items of income will Felix report on his 1040 return? What is Felixs outside basis in his partnership interest at the end of 2021?