Alfonso began the year with a tax basis in his partnership interest of $29,000. his share of partnership debt at the beginning and end of the year consists of $3,000 of recourse debt and $6,000 of nonrecourse debt. during the year, he was allocated $49,000 of partnership ordinary business loss. alfonso does not materially participate in this partnership and he has $1,000 of passive income from other sources.

Performance bicycle company makes steel and titanium handle bars for bicycles. it requires approximately 1 hour of labor to make one handle bar of either type. during the most recent accounting period, barr company made 7,700 steel bars and 2,300 titanium bars. setup costs amounted to $35,000. one batch of each type of bar was run each month. if a single company-wide overhead rate based on direct labor hours is used to allocate overhead costs to the two products, the amount of setup cost assigned to the steel bars will be: