Anna and Brad are equal partners in a general partnership. Anna put in $200,000 cash for her share of the partnership. Brad put in a building that had a FMV and book basis of $1,100,000 (basis is $850,000) and a debt of $900,000 that was secured by the building for his share. Anna and Brad share all profits and losses equally.

1. How would the debt be allocated to Anna and Brad when the partnership was formed assuming that the partnership did not make any special election for the Tier 3 allocation?

2. At the end of Year 5 the building has a book basis of $850,000 and a tax basis of $750,000 while the debt remains at $900,000. How would the debt be allocated to Anna and Brad now assuming no special election for Tier 3?