Question
W, X, Y and Z each contribute $200,000 for a 25% interest in the W, X, Y and Z partnership. The partners all meet the
W, X, Y and Z each contribute $200,000 for a 25% interest in the W, X, Y and Z partnership. The partners all meet the 3 tests for economic effect and the tests for allocation of non-recourse debt. The partnership uses the $800,000 cash plus a non- recourse loan to buy a building for $4,000,000. The building is depreciable over 20 years on a straight-line basis. Income for all years equals expenses except for tax depreciation which is allocated all to W.
- How much depreciation will W be allowed to take in year 1?
- How much depreciation will W be allowed to take in year 2?
- What effect, if any, would a negative capital account have on W's ability to take depreciation deductions?
- What is W's tax basis in his partnership interest after year 1? After year 2?
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To calculate the depreciation that W will be allowed to take in year 1 and year 2 we first need to determine the partnerships total depreciable basis ...Get Instant Access to Expert-Tailored Solutions
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Get StartedRecommended Textbook for
Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
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