Use the following information for the four questions below.

Fred, Ethel, and Regina contribute the following properties to the FER Partnership:

Fred has a 40% profits and capital interest in this partnership while Ethel and Regina each have a 30% interest in the same.The partners agree that all capital, profits, losses, and recourse liabilities will be shared according to their respective capital interests.Within days of formation, the partnership also borrows $100,000 on a recourse liability

What is each partner's outside basis at formation (including the liability assumption)?

Assume that the following occur in the first year of operations:

a) The partnership sells the inventory contributed by Regina for $50,000.All of this amount has been collected.

b) The partnership depreciates the equipment.Assume that the equipment is depreciated straight line over 3 years for both book and tax purposes.

c)The partnership purchases an additional $80,000 of inventory and sells $60,000 of that amount for $120,000. Inventory purchased has been paid for by the end of the year and all the sales revenue has been collected.

d) The partnership has operating expenses (other than depreciation and cost of goods sold) of $40,000 and all of these are paid in cash.

e) $30,000 of the $100,000 loan has been repaid by year end.

f) A cash distribution of $24,000 is made to Fred and distributions of $18,000 each are made to Ethel and Regina.

Illustrate the ending partnership balance sheet in conformity with the worksheet introduced in class.

Assume instead that FER was organized as an S corporation instead of a partnership.What are the initial stock bases of Fred, Ethel, and Regina?

Assume instead that FER was organized as an S corporation instead of a partnership.What are the stock bases of Fred, Ethel, and Regina at the end of the Year 1 events described in Question #2?