Jo and Velma are equal owners of the JV Partnership. Jo invests $500,000 cash in the partnership. Velma contributes land and a building (basis to her of $125,000, fair market value of $500,000). The entity then borrows $250,000 cash using recourse financing and $100,000 using nonrecourse financing.
a. Compute the outside basis in the partnership interest for Jo and Velma.
b. Compute the at-risk amount for Jo and Velma.