Partnership Case Study 2006-4

Partnership Case Study 2006-4 - TAX 6205 PARTNERSHIP CASE...

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TAX 6205 – PARTNERSHIP CASE STUDY 2006 Leland Real Estate Limited Partnership The Leland Real Estate Limited Partnership (Leland) was formed on January 1, 2004 to purchase, construct and manage residential real estate. The partnership adopted the accrual method of accounting and a calendar year for Federal tax purposes. On February 2, 2004 Leland purchased the Longstreet Manor apartment complex for a total price of $5,000,000. The total purchase price was allocated $1,000,000 to the land and $4,000,000 to the buildings. Leland financed the acquisition by obtaining a fifteen-year $4,500,000 mortgage from a savings and loan that is unrelated to any of the Leland partners. The mortgage is secured by the apartment complex, but is fully recourse to the partnership. No other properties were purchased during 2004. A summary of partnership operating revenues and expenses for 2004 is attached. The Leland partnership agreement provides that the corporate general partner, KLM Properties, Inc. (KLM) will receive an annual management fee equal to 5 percent of the gross rental income earned by the partnership. This fee is reasonable by local industry standards. In return for the fee, KLM will provide all necessary services so the Leland will not have to hire any partnership employees. All partnership taxable income, gain, or
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This note was uploaded on 04/11/2009 for the course ACG 5658 taught by Professor Moussalli during the Spring '08 term at W. Florida.

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Partnership Case Study 2006-4 - TAX 6205 PARTNERSHIP CASE...

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