background info

Read about A \& J Gift and Coffee House's partners and determine what additional information is needed from the partners for you to advise hem on their tax planning. Background Aliyah Franklin and Jayden Jones have both had businesses on the same city block for years. Ms. Franklin owns and operates a gift shop and Mr. Jones owns and operates a colfee shop. They are planning to form a partnership called A \& J Gift and Coffee House in 2022 . They both plan to contribute assets that are used in their respective businesses to start the partnership. These assets have increased substantially in value. Ms. Franklin also plans to contribute some cash to help with the liquidity of the partnership. While these assets that they plan to contribute on formation will help the partnership begin its operations, the partnership will need additional assets to continue to operate. The partners plan to borrow money to help acquire these assets, but they are wondering what the implications of borrowing this money will be. They have come to us, as their tax advisors, for an explanation of the implications. Write a memo to A \& J Gift and Coffee House's partners with an explanation of the tax issues they should consider and the related tax implications when borrowing the money to help acquire additional assets. In the memo, include your determination of what additional information you would need from the partners to fully determine the tax implications. On January 1, 2022, Demi Lee and Quinn Brown formed The Custom Cabinets Company. Demi contributed cash of $240,000 to the partnership in return for a 60% interest in capital and profits. Quinn contributed machinery with a basis of $90,000 and a fair market value (FMV) of $160,000 to the partnership in return for a 40% interest in capital and profits, Quinn depreciated the machinery using the straightline method. There were five years remaining in the original eight years of useful life of the machinery when Quinn contributed it to the partnership. The partnership had operating income for 2022 of $40,000