The ZA Partnership assumes the $90,000 recourse mortgage on the building that Andrew contributes, and the partners share the economic risk of loss on the mortgage equally. Andrew has claimed $30,000 in straight-line depreciation under the MACRS rules on the building. Zoe is a stockbroker and contributed securities from her inventory. The partnership will hold them as an investment.

Contributions:

Individual Asset Basis to Partner FMV

Zoe Cash $ 35,000 $ 35,000

Zoe Inventory 18,000 20,000

Andrew Land 35,000 20,000

Andrew Building 75,000 110,000

a.	What amount and character of gain or loss must each partner recognize on the formation of the partnership?
b.	What is each partner's basis in his or her partnership interest?
c.	What is the partnership's basis in each asset?
d.	What is the partnership's initial book value of each asset?
e.	The partnership holds the securities for two years and then sells them for $30,000. What amount and character of gain must the partnership and each partner report?