On January 1, 2022, C and D form an equal partnership to which C contributes machinery with a tax basis of $2,000 and a fair market value of $3,000. D contributes cash of $3,000, The machinery is being depreciated on a straight-line basis and has a remaining life of five years. The partnership also has ordinary income of $280. Assume, instead, that the basis of the equipment contributed by C is only $800 at the time of contribution. All the other facts are the same. Using the traditional method with curative allocations, determine the tax basis and Sec. 704(b) book basis depreciation for C and D for Year 1. Also, show the allocation of the ordinary income to C and D for the current year.
On January 1, 2022, C and D form an equal partnership to which C contributes machinery with a tax basis of $2,000 and a fair market value of $3,000. D contributes cash of $3,000, The machinery is being depreciated on a straight-line basis and has a remaining life of five years. The partnership also has ordinary income of $280. Assume, instead, that the basis of the equipment contributed by C is only $800 at the time of contribution. All the other facts are the same. Using the traditional method with curative allocations, determine the tax basis and Sec. 704(b) book basis depreciation for C and D for Year 1. Also, show the allocation of the ordinary income to C and D for the current year.
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 20P
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- On January 1, 2022, C and D form an equal
partnership to which C contributes machinery with a tax basis of $2,000 and a fair market value of $3,000. D contributes cash of $3,000, The machinery is beingdepreciated on a straight-line basis and has a remaining life of five years. The partnership also has ordinary income of $280.
Assume, instead, that the basis of the equipment contributed by C is only $800 at the time of contribution. All the other facts are the same. Using the traditional method with curative allocations, determine the tax basis and Sec. 704(b) book basis depreciation for C and D for Year 1. Also, show the allocation of the ordinary income to C and D for the current year.
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Ordinary income |
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