The ABC Partnership distributes the following property to Alex in a distribution that liquidates Alex's interest in the partnership. Assume that no Sec. 754 election is in effect. Alex's basis in his partnership interest before the distribution is $69,000. The adjusted bases and FMVs of the distributed property to the partnership before the distribution are as follows:

Assets Basis FMV

Cash $ 5,000 $ 5,000

Inv. 16,000 8,000

Capital Asset 1 20,000 30,000

Capital Asset 2 40,000 35,000

Total 81,000 88,000

Determine Alex's basis in each distributed asset. Show computations for full credit.

b. Tower Corporation, a calendar year taxpayer, has been an S corporation for several years. David and John each own 50% of Tower's stock. On September 1 of the current year (assume a non- leap year), Tower issues additional common stock to Hill Corporation for cash. David, John, and Hill each end up owning one- third of Tower's stock. Tower reports ordinary income of $ 250,000 and a short- term capital loss of $ 30,000 in the current year. Eighty percent of the ordinary income and all the capital loss accrue after Hill purchases its stock. Tower makes no distributions to its shareholders in the current year. What income and losses do Tower, Hill, David, and John report as a result of the current year's activities? If there is more than one possible method, discuss both methods.