Problem

On January 17, 2011, Brandon contributed $100,000 cash to the Brandon-Landon partnership for a one-half interest in capital and profits. Landon contributed property with a basis to him of $100,000 and a fair market value of $200,000. On March 13, 2011 the partnership transferred $100,000 of cash to Landon. Five days later the partnership borrowed $160,000 from the bank to finance the partnership's activities. The note was secured by the property that Landon contributed, although the bank agreed to look only to the property for collateral and that if they partnership defaulted, the bank would only seek recovery through sales proceeds from selling the property. Brandon and Landon did not have any personal liability on the loan.

What amount and character is considered a gain or loss for Brandon and Landon's interest in the partnership?

What affect does it have on the partnership assets?

What is the inside and outside basis of both partners?