Partners A, B, C and D each contribute $100,000 for 25% of the ABCD partnership.
The partners all meet the three tests for economic effect, and the four tests for allocation of nonrecourse deductions are met as well.
They use the $400,000 cash and $3,600,000 of nonrecourse financing to buy a building that is depreciable over 20 years on a straight line basis.
Income equals expenses in all years, except for depreciation, which is allocated completely to D.
How much of the depreciation deduction in each year (from year 1 to year 3) will D be allowed to take?