Joshua is a 30% partner in a partnership. His basis at the beginning of the year was $13,000. During the current year, the partnership had operating losses of $40,000. In addition, the partnership had long-term capital gains of $15,000 and Sec. 1231 losses of $10,000. The partnership's liabilities also increased by $20,000 during the year. Finally, the partnership distributed cash and property to its partners. Joshua received the following:

Joshua's Cash and Property Distribution

Basis     FMV

Cash                     $1,800

Machinery         $3,100  $5,300

Inventory           $2,800  $4,600

Land     $4,900  $7,150

Determine the basis and return effects for Joshua.

How would your answer change if the partnership's liabilities decreased by $20,000 instead of increased by $20,000?