Reference no: EM133140606
Question - A contributes $100,000 cash to the AB partnership and B contributes a building. Partners A and B share equally in all income, gains, deductions, losses and credits. The building has a 20-year cost recovery period and has been depreciated for ten years when B contributes it to the partnership. The building has a ten-year remaining contribution period and is depreciated under the straight-line method with no salvage value. Upon contribution, the building has an adjusted basis of $40,000 and has a fair market value of $100,000. Unless otherwise stated, assume that the partnership's income equals its deductions.
1. Traditional Method. Under the "traditional method," how will the partnership allocate each year's depreciation on the building for book and tax purposes? Show all computations.
2. Traditional Method with Curative Allocations. Under the "traditional method with curative allocations," how will the partnership allocate each year's depreciation on the building for book and tax purposes? Show all computations and assume that the partnership has $2,000 of additional rental income each year.
3. Remedial Allocation Method. Under the "remedial allocation method," how will the partnership allocate each year's depreciation on the building for book and tax purposes? Show all computations.
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