A limited partnership consisting of A, B, and C purchased a building for $100,000 paying $30,000 cash and taking a non-recourse mortgage of $70,000. Depreciation of the building is $10,000 per year. Their interest in profits and losses are 20%, 40%, and 40%. The partnership agrees to allocate recourse deduction equally (33 1/3%) to each partner. Assume the allocations of non-recourse deductions will be respected. The partnership agreement complies with the alternative test for economic effect and contains a minimum gain chargeback provision. Each partner's capital account on 1/1 of year 1 is $10,000.
a) What is the partnership minimum gain for year 2?
b) What are the non-recourse deductions for year 2?
c) How are non-recourse deductions allocated for year 2?
d) What is the partnership minimum gain for year 4?
e) What are the non-recourse deductions for year 4?
f) How are non-recourse deductions allocated for year 4?
g) What is each partner's share of partnership minimum gain at the end of year 4?
A limited partnership consisting of A, B, and C purchased a building for $100,000 paying $30,000 cash and taking a non-recourse mortgage of $70,000. Depreciation of the building is $10,000 per year. Their interest in profits and losses are 20%, 40%, and 40%. The partnership agrees to allocate recourse deduction equally (33 1/3%) to each partner. Assume the allocations of non-recourse deductions will be respected. The partnership agreement complies with the alternative test for economic effect and contains a minimum gain chargeback provision. Each partner's capital account on 1/1 of year 1 is $10,000.
a) What is the partnership minimum gain for year 2?
b) What are the non-recourse deductions for year 2?
c) How are non-recourse deductions allocated for year 2?
d) What is the partnership minimum gain for year 4?
e) What are the non-recourse deductions for year 4?
f) How are non-recourse deductions allocated for year 4?
g) What is each partner's share of partnership minimum gain at the end of year 4?
Related questions
Basil Company is owned equally by Bandi, Silvio, and Lia. At thebeginning of the year, Basil Company had the following balancesheet:
Fair Market Value | Adjusted Basis (Tax) | |
Cash | $ 15,000 | $ 15,000 |
Inventory | $ 6,000 | $ 8,000 |
Investment portfolio | $ 39,000 | $ 22,000 |
Land | $ 90,000 | $ 30,000 |
Total assets | $ 150,000 | $ 75,000 |
Debt (non-recourse) | $ 30,000 | $ 30,000 |
Equity | $ 120,000 | $ 45,000 |
Total liabilities & equity | $ 150,000 | $ 75,000 |
In the current year, Basil has interest income of $10,000;qualified dividend income of $12,000. It also sold all of theinventory for $5,500 and all of the investment for $42,500. No newassets were purchased.
Requirements: For each of the following threesituations determine:
The companyâs overall book net income
The companyâs ordinary income and separately stated items (taxonly)!
The companyâs ending balance sheet (book & tax)
The companyâs tax liability (if any)
The amount of income, gain, or loss each owner will be reportingon his or her individual tax return
Each ownerâs ending basis in the company
Situation 2: Basil Company is an S corporation that has neverbeen a C corporation. The non-recourse liability is a note payableto Bandi. The ownersâ bases in the S corporation common stock are$10,000 (Bandi); $15,000 (Silvio); and $20,000 (Lia).
