Part A

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 partnerships 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.

Part B

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