Formation of the partnership

Anthony Commonplace and Billie Campus have agreed to form a cash-basis general partnership, Live-It-Up Partners, to own and operate apartment complexes in Universityville, USA. As of January 1, 20X4, the partnership takes legal title to the contributed property and commences operations. At the time of formation, Anthony contributed $275,000 cash and an apartment complex, Late Night Apts, valued at $2.75 million. Anthony purchased the complex on July 31, 20X1 for $2.1 million dollars and has been operating the property as a sole proprietorship. The property is subject to a recourse debt of $845,000 that is assumed by the partnership. Billie contributed $1,066,000 cash and an apartment complex, Campus Center Apartments, valued at $2.8 million and investment land valued at $315,000. Billie purchased the complex on December 1, 20X2 for $1.95 million and has been operating the property as a sole proprietorship. The complex is subject to a nonrecourse debt of $2.001 million. The land was purchased on September 8, 20X0 for $175,000.

In November and December 20X3, Anthony and Billie paid $45,000 for expenses that qualify as organizational costs. During this time, they also paid $5,000 for costs that meet the de?nition of start -up expenses. The $50,000 expense was paid for evenly by the two partners.

Immediately after formation, Anthony and Billie agreed to admit Curtis Laborer to the partnership. In return for agreeing to manage the daily operations of the partnership, Curtis received a 10% interest in capital and pro?ts. His interest in the partnership vests immediately.

Partnership operations

The partnership agreement complies with the 704(b) capital account maintenance requirements and contains a de?cit capital account restoration provision.

For the formation of the partnership (right after Curtis was admitted to the partnership)

1.A schedule showing the basis of the apartment complexes contributed by Anthony and Billie which should include the deprecation taken before contribution to the partnership and the built in gain calculation on the contributed property.

2.The tax and book journal entries to record the formation of the partnership for Anthony and Billie.

3.Determination of tax gain to Anthony and Billie on the exchange with Curtis for services provided.

4.The tax journal entries to record the admittance of Curtis (One for the deemed distribution of assets to Curtis and one for the deemed contribution by Curtis).

5.The book journal entry showing just the transfer of the capital amount from Anthony and Billie to Curtis.

6.A book balance sheet right after Curtis is admitted (use the book AJE's from step 2 and 5 to prepare the balance sheet).

7.A schedule showing how the recourse loan is to be allocated to the partners.

8.A schedule showing how the nonrecourse loan is allocated to the partners.

9.A schedule of inside basis (tax basis of all the assets on partnerships balance sheet) and a schedule of each partners outside basis (partners tax basis in partnership).You should use your journal entries to help you with answering this question.

MACRS - Realty Table 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) 2 3 5 6 10 11 12 3.485 3.182 2.879 2.576 2.273 1.970 1.667 1.364 1.061 0.758 0.455 0.152 2-18 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 19-27 3.637 3.637 3.637 3.637 3.637 3.637 3.637 3.637 3.637 3.637 3.637 3.637 28 1.970 2.273 2.576 2.879 3.182 3.485 3.636 3.636 3.636 3.636 3.636 3.636 29 0.000 0.000 0.000 0.000 0.000 0.000 0.152 0.455 0.758 1.061 1.364 1.667 .. Property Placed in Service after December 31, 1986, and before May 13, 1993: 31.5-Year Nonresidential Real Prom Recovery The Per cable Percentage Is (Use the Column for the Month in the First Year the Pronew "Is Placed in Service): Year(s) 2 4 5 7 10 11 12 1 3.042 2.778 2.513 2.249 1.907 1.455 1.190 0.926 0.661 0.397 0.132 2-19 3.175 3.175 3.175 3.175 3.175 135 3.175 3.175 3.175 3.175 3.175 20-31 3.174 3.174 3.174 0.174 3.174 3.174 3.174 3.1 3.174 3.174 3.174 3.174 32 1.720 2.249 2.513 2.778 3.042 3.175 3.175 3.175 3.175 3.175 33 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) 2 10 11 12 2.461 2.247 2.033 1.819 1.605 1.391 1.177 0.963 0.749 0.535 0.321 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 0.749 0.963 1.177 1.391 1.605 1.819 2.033 2.247 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