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hi, i need solution to the attached question. thank you B. Contributions of Depreciable Property Five years ago, A acquired equipment to use in her
hi, i need solution to the attached question. thank you
B. Contributions of Depreciable Property Five years ago, A acquired equipment to use in her leasing business. The equipment had a recovery period of 10 years and A elected to use straight line depreciation. On January 1 of this year, A formed an equipment leasing partnership with B. A contributed the equipment with a fair market value of $100 and B contributed $100 in cash. A and B agreed to share all profits and losses equally. The partnership will maintain the partners' capital accounts according to Reg. 1.7041(b)(2)(iv). The equipment would have had a 10 year recovery period if the partnership had purchased the equipment this year. Each year the partnership will have gross rental income of $20 before taking into account depreciation. The partnership will have no other income and no expenses other than depreciation. 1. Traditional Method. Under the "traditional method", how will the partnership allocate each year's depreciation on the equipment for book and tax purposes if A's basis in the equipment (at the time of contribution) was, alternatively: (a) $80 (b) $120 (c) $50 (d) $20 2. Curative Allocations. Assume in problem 1(d) above that the partners agreed to use the "traditional method with curative allocations". (a) Would curative allocations affect the partners' 5050 allocations of "book" items for purposes of Reg. 1.7041(b)(2)(iv)? (b) How would the partnership allocate its $20 per year of gross rental income and its tax depreciation? 3. Remedial Allocations. What would result in 1(b) above if B insisted that the partnership use the "remedial allocation method"Step by Step Solution
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