A and B form the AB equal general partnership. A contributes \($50,000\) cash and a depreciable asset with a fair market value of \($50,000\) and an adjusted basis of \($20,000.\) Assume the property is depreciable by the partnership over five years under the straight line method. B contributes \($100,000\) cash. A and B agree to comply with The Big Three, to share all profits and losses equally, and to use the traditional method in making § 704(c) allocations.

(a) What is the amount of depreciation in Year 1 for book purposes and for tax purposes?

(b) How is the depreciation allocated between A and B?

(c) What are A’s and B’s outside bases in their partnership interests at the end of Year 1? Assume that AB breaks even except for cost recovery deductions.

(d) What are the balances in A’s and B’s capital accounts at the end of Year 1? Assume that AB breaks even except for cost recovery deductions.