1. Alliance & CO has outstanding bonds with 15 years left to maturity. They have a coupon payment of 8.5% paid semiannually. The usual par value of $1,000 applies. Currently they sell for $1,025. Find the after-tax cost of debt if the tax rate is 37%.

2. In a non-liquidating context, if a partner has outside basis of $25,000 and receives a distribution of $20,000 in cash and property worth $40,000 (partnership basis of $15,000), what will be the partners outside basis in the property received and their outside basis in the partnership after the distribution?