Question 4 Note: Please show detailed calculations and explanations. Answers without showing calculations/explanations, will not receive credit. On March 15, 20X9, Troy, Peter, and Sarah formed Picture Perfect General Partnership. This partnership was created to sell a variety of cameras, picture frames, and other photography accessories. When it was formed, the partners received equal profits and capital interests, and the following items were contributed by each partner: Troy-cash of $3,000, inventory with an FMV and tax basis of $5,000, and a building with an FMV of $22,000 and adjusted basis of $10,000. Additionally, the building was secured by a $10,000 nonrecourse mortgage. Peter-cash of $5,000, accounts payable of $12,000 (recourse debt for which each partner becomes equally responsible), and land with an FMV of $27,000 and tax basis of $20,000. Sarah-cash of $2,000, accounts receivable with an FMV and tax basis of $1,000, and equipment with an FMV of $40,000 and adjusted basis of $3,500. Sarah also contributed a $23,000 nonrecourse note payable secured by the equipment. a) What is Troy's outside basis, and how much gain (loss) must the partner recognize in 20X9, when Picture Perfect was formed? b) What is Peter's outside basis, and how much gain (loss) must the partner recognize in 20X9, when Picture Perfect was formed? c) What is Sarah's outside basis, and how much gain (loss) must the partner recognize in 20X9, when Picture Perfect was formed? Hint: Normally, nonrecourse debt will be shared among partners (allocated based on their interest in the partnership). However, when a nonrecourse debt of a property contributed exceeds the property basis, then all of the excessive amount is allocated solely to the contributing partner, and only debt amount up to the basis is shared among other partners. That is Sarah's debt situation here. To calculate the basis of each partner, you would first need to find out how much debt is contributed, which one is shared, which one is allocated solely to an individual. Working on this question as a whole (creating a table to calculate the basis for all 3 partners at the same time such as in the notes) would be better than working on it one by one.