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Fall_2011_Partnership_problem - , whichwasformedon1...

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Dehna Partnership problem The Dehna Partnership is a calendar year, cash basis limited partnership which was formed on 1 January 2010 . The partnership is in the business of dressage (competitive horse training)(business code 541990 ). The address for the partnership and both partners is 300 Montgomery Street, Suite 1050, San Francisco, CA 94104. All business is carried on in the San Francisco Bay Area, and the partnership has no foreign activities of any kind. The partnership return is filed in Ogden, Utah. The partnership's federal ID number is 94 0070070 . The partnership agreement follows the provisions of IRC Section 704 and provides that gains , losses, and depreciation will be allocated in such a manner so as to account for the differences between agreed market values and the tax basis of assets contributed to the partnership. For example, should the agreed value exceed the tax basis of a contributed asset, any gain due to the difference shall be allocated to the contributing partner upon sale of the asset. Any remaining gain shall be allocated in the "regular" ratio in which partners share income and losses. Furthermore, depreciation expense on contributed assets is to be allocated to the noncontributing partner as if the asset's FAIR MARKET VALUE were EQUAL to its tax basis; any remaining depreciation is to be allocated to the contributing partner. Outside of the special IRC Section 704 allocations discussed in the preceding paragraph, all other items are allocated in the "normal" profit and loss ratios for the partnership. Data on the partners, the assets contributed by them, and the profit and loss ratios agreed upon are as follows: Tara Stephens (SSN: 007 06 1991), the general partner Kevin Fell (SSN: 006 01 1985), the limited partner. Tara 60% profit & loss ratio. Tara contributed a parcel of land (acquired on 1/1/1995 as investment property) and its related mortgage. The land originally cost $208,000 and had a fair market value of $350,000 as of the date it was contributed to the partnership. There was a $180,000 balance on the qualified nonrecourse mortgage assumed by the partnership. The land is known as "Dragon Acres".
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