Problem
On March 15, 20X0, Adam, Bryan, and Carrol formed ABC general partnership. This partnership was created to sell a variety of cameras, picture frames, and other photography accessories. When it was formed, the partners received equal profits and capital interests and the following items were contributed by each partner:
1) Adam: cash of $3,000, inventory with a FMV and tax basis of $5,000, and a building with a FMV of $22,000 and adjusted basis of $10,000. Additionally, the building was secured by a $10,000 nonrecourse mortgage.
2) Bryan: cash of $5,000, accounts payable of $9,000 (recourse debt for which each partner becomes equally responsible), and land with a FMV of $27,000 and tax basis of $20,000.
3) Carrol: cash of $2,000, accounts receivable with a FMV and tax basis of $1,000, and equipment with a FMV of $40,000 and adjusted basis of $3,500. Carrol also contributed a $23,000 nonrecourse note payable secured by the equipment.
Task
What is each partner's outside basis and how much gain (loss) must the partners recognize in 20X0 when ABC was formed?