Part A:

Abe and Betty formed the AB general partnership. The partnership agreement provides that A and B share all items of partnership income and loss equally. A contributed $10,000 cash and B contributed property with a basis of $8,000 and a fair market value of $16,000. The property was subject to a $6,000 recourse liability which was assumed by the partnership. What is Abe and Bettys initial basis in their partnership interest (outside basis)? Clearly show your work and explain your answer

Part B:

In year 1 the only item of income or loss the partnership reported was ordinary income of $4,000. In addition, the partnership distributed $3,000 to Abe and $1,000 to Betty. What is Abe and Bettys basis in their partnership interest (outside basis) at the end of year 1? Clearly show your work and explain your answer.