Provide the tax consequences for each scenario regarding partnership formation contributions - Cite any resources used

Under Alternative #1, Alf contributes fifteen faucets and knobs she had made by hand over the past two years in her spare time. The designs are new and have never been marketed in the trade. However, if this design catches on as a fad, the partnership will make a substantial amount of money. Her tax basis comes to $500 (the raw materials involved); Eb and Ralph (mostly out of generosity and team spirit) agree that the items are worth $1,000 and will credit her capital with $1,000.

Under Alternative #2, Alf contributes a letter of commitment to perform all of the plumbing work in a proposed shopping center. Alf handled all the negotiations for two years while working for her father before the commitment finally came through. Unfortunately, the commitment grants the contract to the fathers business and does not say whether a business without Alfs father could be appointed to do the job. This letter (along with all the other assets) was given to Alf when her father retired. Alfs basis in the letter is zero. As with the faucets and knobs, Eb and Ralph agree that the commitment's fair market value equals $1,000 and Alf's capital account will be credited with this value.