Joe and Sunny intend to enter into a business venture together and decided that a partnership would be a desirable entity choice for federal income tax purposes. The partnership is named Michigan Partnership (MIP). For newly established MIP, Joe intends to contribute Property A with fair market value (FMV) of $800 and basis of $300. Sunny intends to contribute cash of $800. For purposes of this question, Joe and Sunny are equal partners with no special tax allocations.

Question1: Assume that at the end of Year 1, MIP had an operating loss of $100 instead of $500. Also, MIP made cash distribution of $800 at the end of Year 1. Provide Joes and Sunnys outside basis at the end of Year 1 and also provide any additional tax consequence(s) for Joe and Sunny if any.

Question 2: Assume that at the end of Year 1, MIP had an operating loss of $100. Also, MIP made distribution of Property A only to Joe at the end of Year 1. For purposes of this question, assume no depreciation was taken for Property A for Year 1 and FMV remained the same from the date of contribution. Provide Joes and Sunnys outside basis at the end of Year 1 and Joes basis in Property A upon distribution to him.

Question 3: Assume that at the end of Year 2, Joes and Sunnys basis in MIP are $500 and $700, respectively. For purposes of this question, Property A was not distributed to Joe as noted above. Rather, Property A was disposed at the end of Year 2. At the time of disposition, FMV and basis of Property A were $900 and $100, respectively. What would be Joes and Sunnys outside basis at the end of Year 2.