Partnership taxation

1.Assume A and B form general partnership AB as equal partners. A contributes land with a basis of $10 and fair market value of $100; B contributes $100 cash. Later, the value of the land increases to $500 at which time AB borrows $500 on a nonrecourse basis secured by the land. $400 of the proceeds of the loan are distributed, $200 to A and $200 to B. AB uses the traditional method to make section 704(c) allocations. There are no additional relevant facts.

a.How is the nonrecourse loan allocated between A and B?

b.What are A's outside basis and A's book capital account after the distribution?

c.What are B's outside basis and B's book capital account after the distribution?