Krypton Partnership owns and operates an office building in the medical district of a large city. The property was contributed to the partnership several years ago by Partner K. Under the terms of the partnership agreement, K is allocated 20% of the partnerships profits, gains, losses, and deductions, other than depreciation. Depreciation is allocated 50% to K and 50% to the other partners. The office building is encumbered by a nonrecourse mortgage of $750,000. Its tax basis is $650,000 and its book value is $875,000.

True or False?

The partnership could allocate $475,000 of the liability to K this year and change the allocation to $330,000 next year (adjusted for changes in the tax basis and the book value of the property).

Group of answer choices

True

False