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  3. g and h form partnership gh. in year 1, both g and

G and H form Partnership GH. In year 1, both G and H contribute $100,000...

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Accounting

G and H form Partnership GH. In year 1, both G and H contribute $100,000 each for equal interests in the partnership.  H has an NOL carry forward that will expire at the end of year 2. G and H agree that in years 1 and 2 100% of the net income will be allocated to H, and in year 3, G will be allocated enough gross income as to equalize the total income recognized by the partners cumulatively from years 1 through 3.

a.     Does this special allocation have substantial economic effect?

b.    What if the catch-up allocation (the special allocation of gross income to G) occurs in year 8?

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