The depreciation deduction in each year from year 1

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the depreciation deduction in each year (from year 1 to year 3) will D be allowed to take?
6. Assume the same facts as the prior problem. If the building is sold at the end of year three for $4,100,000, how much gain would each partner have to recognize? 7. Partners A and B each contribute $100,000 for 50% of the AB partnership. The partnership allocations meet the three tests for economic effect, and the four tests for a valid allocation of nonrecourse deductions are met as well. They use the $200,000 cash and $1,800,000 of debt to buy a building that is depreciable over 20 years on a straight line basis. $200,000 of the debt is nonrecourse, and is subordinate to the other $1,600,000 of recourse debt. Income equals expenses in all years, except for depreciation, which is allocated completely to B. How much of the depreciation deduction in each year (from year 1 to year 5) will B be allowed to take? 8. Assume that in Problem 7 above B does not have a deficit capital account restoration requirement (A still does), but with respect to B the alternate test for economic effect is met. The partnership agreement still allocates all depreciation to B. How would the depreciation be allocated in years 1-5? 9. What would your answer to Number 8 be if the nonrecourse debt had priority over the recourse debt? © 2018 CCH Incorporated and its affiliates. All rights reserved.
Practical Guide to Partnerships and LLCs—Instructor’s Guide Problems 10. LP is a limited partner and GP is a general partner of the LG partnership. LP contributes $90,000 and GP contributes $10,000 to the partnership, which then gets a $400,000 nonrecourse loan and purchases a building for $500,000. GP is required to make up any capital account deficit, but LP is not. However, the partnership agreement has a qualified income offset provision for LP and also a minimum gain chargeback provision. The partnership allocates 90% of all partnership items to LP and 10% to GP, until the partnership generates minimum gain. At that point they will be allocated 50/50. Is this allocation “reasonably consistent” with the allocation of items that do have substantial economic effect? What would your answer be if, after the partnership generates minimum gain, items of income and loss are allocated 99% to LP and 1% to GP? © 2018 CCH Incorporated and its affiliates. All rights reserved.

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