Unicorn and Zebra form the UZ Co., a partnership. Unicorn contributes inventory with fair market value of $650,000 and an adjusted basis of $200,000 and cash of 350,000 for a 50% interest in the partnership. Zebra contributes computers, hardware, and proprietary software with a fair market value of $1,000,000 and a tax basis of $300,000 for a 50% interest in the partnership. The computer hardware, which was purchased from IBM on credit, is subject to an equipment loan of $300,000.

DISCUSS THE TAX IMPACT TO:

1. Unicorn-
2. Zebra, and-
3. UZ Co.-

PLEASE LABEL EACH TAX IMPACT BASED ON THE NUMBER