Alex and Betty have agreed to form a cash-basis general partnership
As of January 1, 20X4,
Alex contributed $175,000 cash and an apartment complex valued at $2,578,000. Alex purchased the complex on April 12, 20X1 for $1,850,000 and has been operating the property as a sole proprietorship. The property is subject to a recourse debt of $775,000 that is assumed by the partnership.
Betty contributed $1,080,000 cash and an apartment complex valued at $2,600,000 and investment land valued at $425,000. Betty purchased the complex on November 7, 20X2 for $2,125,000 and has been operating the property as a sole proprietorship. The complex is subject to a nonrecourse debt of $2,127,000. The land was purchased on August 28, 20X2 for $325,000.
In November and December 20X3, Alex and Betty paid $17,000 for expenses that qualify as organizational costs. During this time, they also paid $13,000 for costs that meet the denition of start-up expenses. The $30,000 expense was paid for evenly by the two partners.
Immediately after formation, Alex and Betty agreed to admit Charles to the partnership. In return for agreeing to manage the daily operations of the partnership, Charles received a 10% interest in capital and prots. His interest in the partnership vests immediately.
- Calculate the value of the partnership interest by creating a Tax Basis and Book Basis Balance Sheet before the admission of Charles.
- Calculate the income to Charles and the deduction to the partnership
- Calculate the gain on the distribution of assets for the payment to Charles from the partnership
- How will the gain/expenses of this transaction be allocate to the partners capital accounts? Prepare a new balance sheet after Charles has been admitted.
EXHIBIT 8.9 MACRS Straight-Line Depreciation for Real Property Assuming Mid- Month Convention For Property Placed in Service after December 31, 1986: 27.5-Year Residential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 3.059 2-18 19-27 3.485 3.636 3.637 1.970 0.000 3.182 3.636 3.637 2.273 0.000 2.8792.576 3.636 3.636 3.637 3.637 2.576 2.879 0.000 0.000 2.273 1.970 3.636 3.636 3.6373.637 3.182 3.485 0.000 0.000 1.667 3.636 3.637 3.636 0.152 1.364 3.636 3.637 3.636 0.455 1.061 3.636 3.637 3.636 0.758 0.758 0.455 3.636 3 .636 3.6373.637 3.636 3.636 1.061 1.364 0.152 3.636 3.637 3.636 1.667 For Property Placed in Service after December 31, 1986, and before May 13, 1993: 31.5-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 3.042 2.778 2.513 2.249 1.984 1.720 1.455 1.190 0.926 0.661 0.397 0.132 2-19 3.175 3.175 3.175 3.175 3.1753.175 3.175 3.175 3.175 3.1753.175 3.175 20-31 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 1.720 1.984 2 .249 2.513 2.778 3.042 3.175 3.175 3.175 3.175 3.175 3.175 0.000 0.000 0.000 0.000 0.000 0.000 0.132 0.397 0.661 0.926 1.190 1.455 For Property Placed in Service after May 12, 1993: 39-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 2.461 2.247 2.033 1.819 1.6051.391 1.177 0.963 0.7490.5350.321 0.107 2-39 2 .564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 40 0.107 0.321 0.535 0.7490.963 1.177 1.391 1.605 1.819 2.0332.247 2.461 "The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables. EXHIBIT 8.9 MACRS Straight-Line Depreciation for Real Property Assuming Mid- Month Convention For Property Placed in Service after December 31, 1986: 27.5-Year Residential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 3.059 2-18 19-27 3.485 3.636 3.637 1.970 0.000 3.182 3.636 3.637 2.273 0.000 2.8792.576 3.636 3.636 3.637 3.637 2.576 2.879 0.000 0.000 2.273 1.970 3.636 3.636 3.6373.637 3.182 3.485 0.000 0.000 1.667 3.636 3.637 3.636 0.152 1.364 3.636 3.637 3.636 0.455 1.061 3.636 3.637 3.636 0.758 0.758 0.455 3.636 3 .636 3.6373.637 3.636 3.636 1.061 1.364 0.152 3.636 3.637 3.636 1.667 For Property Placed in Service after December 31, 1986, and before May 13, 1993: 31.5-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 3.042 2.778 2.513 2.249 1.984 1.720 1.455 1.190 0.926 0.661 0.397 0.132 2-19 3.175 3.175 3.175 3.175 3.1753.175 3.175 3.175 3.175 3.1753.175 3.175 20-31 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 3.174 1.720 1.984 2 .249 2.513 2.778 3.042 3.175 3.175 3.175 3.175 3.175 3.175 0.000 0.000 0.000 0.000 0.000 0.000 0.132 0.397 0.661 0.926 1.190 1.455 For Property Placed in Service after May 12, 1993: 39-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 2.461 2.247 2.033 1.819 1.6051.391 1.177 0.963 0.7490.5350.321 0.107 2-39 2 .564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 40 0.107 0.321 0.535 0.7490.963 1.177 1.391 1.605 1.819 2.0332.247 2.461 "The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables
