Question
Jeordie and Kendis created the JK Partnership by each contributing $150,000 cash. Pertinent provisions in the JK Partnership agreement are as follows (pay attention to
Jeordie and Kendis created the JK Partnership by each contributing $150,000 cash. Pertinent provisions in the JK Partnership agreement are as follows (pay attention to s' and s'):
Partners' capital accounts will be maintained in accordance with Reg. 1.704-1(b) (the economic effect Regulations)
Any partner with a deficit capital account will be required to restore that capital account when the partner's interest is liquidated.
MACRs depreciation deductions will be specially allocated as follows, 20% to Jeordie and 80% to Kendis. All other items of partnership income, gain, loss, deduction, and credit will be allocated equally between the two partners.
JK Partnership used the $300,000 contributed by Jeordie and Kendis to acquire a depreciable asset. The asset was immediately placed in service and generated a MACRs depreciation deduction of $60,000 for that year. No other operating transactions occurred (yes, this is really weird, completely artificial).
At the end of the year JK Partnership sold the property for $240,000 cash and immediately after liquidated.
REQUIRED:
1: What is JK Partnership's adjusted tax basis in the purchased property on the day it was sold?
2: How much is JK Partnership's gain recognized, if any, on the sale of the property?
3: How much is Jeordie's 704(b) book capital account just before liquidation?
4: How much is Kendis' 704(b) book capital account just before liquidation?
5: What asset does the partnership have to distribute just before liquidation and what is the value of that asset?
6: What does Jeordie and Kendis receive at liquidation?
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