What cash would be distributed to the partners on january

Reference no: EM132826891

Problem 1: A and B form the AB partnership with cash contributions of $50,000 each. Each partner has a one-half interest in the capital, profit, and losses. The partnership purchases an apartment building for $100,000 on January 1, year 1. A wishes to shelter income form nonpartnership activities, so the partnership agreement allocates to her the entire depreciation deduction of $5,000 per year. The partners agree to reflect the depreciation allocation by appropriately adjusting A's capital account and to distribute proceeds on liquidation in accordance with their capital accounts. Assume that other expenses exactly equal income. What cash would be distributed to the partners on January 1, year 4 if the property is sold alternatively for $85,000, $100,000, and $70,000 and if the partnership subsequently liquidated? Does the allocation possess economic effect?

Reference no: EM132826891

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