mes, Adam and David each contribute $10,000 cash to form a general partnership to make and sell pies, and agree to share profits and losses equally. The partnership uses $10,000 to purchase needed equipment and supplies, keeps $11,000 for operating needs and $9,000 in tax-exempt municipal bonds. 1. What is each partner's basis in his partnership interest upon formation? 2. In the partnership's first year, it earns $90,000 of ordinary income from selling pies and $900 from the tax-exempt bonds. What adjustments are made to the partners' outside bases assuming no distributions are made? 3. What adjustments must be made to the partners' outside basis if in the first year the partnership also distributes $20,300 in the middle of the partnership year?