The debt is nonrecourse and is subordinate to the

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$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. o Assume 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? Year 1, No minimum gain is created, B is allocated $100,000 dep. Year 2, No minimum gain is created, A is allocated $100,000 dep. B is allocated $100,000 dep. B is allocated $100,000 dep A is allocated $100,000 dep.
7.1: Review 7.1 in 4-3: Meet/Practice Problems 4 . a. Assume the same facts as in that question, except that the tax basis of the fishing boat was only $140,000, rather than $210,000.
b. If the partnership uses the traditional method under Code Sec. 704(c), how will year 1 tax depreciation be allocated between the partners?
7.2: Assume the tax basis of the fishing boat was $140,000 as above. Further assume that the partnership used the traditional method to allocate tax depreciation in year 1, and that at the end of year 1, it sold the boat for $400,000 and liquidated. How will it allocate book and tax gain between the partners? Will this allocation offset the distortion caused by the ceiling rule in allocating year 1 depreciation between the partners? How will it allocate book and tax gain between the partners? Will this allocation offset the distortion caused by the ceiling rule in allocating year 1 depreciation between the partners?

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