A contributes $100,000 cash to the AB partnership and B contributes a building w
ID: 2575193 • Letter: A
Question
A contributes $100,000 cash to the AB partnership and B contributes a building with an adjusted basis of $50,000 and a fair market value of $100,000. Unless otherwise stated, apply the traditional method with respect to all contributed property.
NEED HELP ON E and F.
(a) If the building is depreciable, has a 10-year remaining recovery period and is depreciated under the straight-line method, how much tax and book depreciation will be allocated to each partner?
(e) If in (a), above, the building is sold for $90,000 after it has been held (and depreciated) by the partnership for two years, how must the partnership allocate the tax gain on the sale?
(f) Same as (e), above except the building is sold for $60,000?
Explanation / Answer
Fair market value of the building = 100000
Life of the asset =10years
Depreciation per year on straight line method = 100000/10=10000
Book value after 2 years = 80000
E). Here capital gain = 10000
In The case of partnership firm is there is any capital gain or capital loss that should be taxable in the hands of partnership firm only. There is no separate legal entity concept applies to partnership firm but business entity concept is applicable to partnership firm which makes partners are separate from the business partnership firm. The profit which is tax in the hands of partnership firm is exempt for the partners are partners of the partnership firm. If there is any capital loss that can be carried forward by the partnership firm only not buy the partners.
So here the capital gains of $10,000 taxable in the hands of partnership firm and the remaining profit which is in p and L account is distributed to the partners.
F) yeah we get the capital loss of $10,000.
L this will be taxable in the hands of partnership firm not in the hands of partners. Here it is carried forward by the partnership firm and set a future capital losses.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.