The KJA partnership is formed by Kennedy, Jane, and Allyson. Kennedy will contribute $$500,000$ cash as will Jane.

Allyson will contribute real property with a FMV of $$800,000$ and subject to a nonrecourse debt of $$300,000.$ This property has a basis of $$400,000$ to Allyson at the date of contribution. A tax basis balance sheet is then:

Cash

$1,000,000$

Property

$400,000$

NR Debt

$300,000$

Kennedy capital

$500,000$

Jane capital

$500,000$

Allyson capital

$100,000$

After formation the partnership will borrow from a bank to fund development. The partnership borrows $$2,000,000$ from the bank. Kennedy will pledge land that she owns outside of the partnership as security for this loan. That land has a FMV of $$600,000$ at the date of the pledge. Jane will personally guarantee the debt. Neither Kennedy nor Allyson are involved in the guarantee.

At the end of the year the balance sheet is as follows $($no activity has taken place other than the contribution and the loan$)$:

Cash

$3,000,000$

Property

$400,000$

NR Debt

$300,000$

Bank Debt

$2,000,000$

Kennedy capital

$500,000$

Jane capital

$500,000$

Allyson capital

$100,000$

Show how the partners$$ shares of the debt will be determined and classified on the K$-1$ forms.