CASH and PROPERTY form a partnership in which each has a 50% interest in partnership profits, losses and capital. CASH contributed $17000 cash and PROPERTY contributed a piece of depreciable property with a fair market value of $17000 and an adjusted basis of $6800. PROPERTY had purchased the property three years ago for $17000.

Assume that all depreciable property must be depreciated using a five year life and straight-line depreciation. Further assume that the property is rented out by the partnership and that rental income exactly equals expenses, other than depreciation,

Determine the tax consequences of the property to the partnership and each of the partners for all relevant years if the partnership uses "remedial allocations" method. Construct the partnership's balance sheet for all applicable years. Determine tax consequences of liquidation of partnership after property fully depreciated.