The MN Partnership was formed by Morgan and Nate. Morgan contributed $45,000 cash for a 50%...

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Accounting

The MN Partnership was formed by Morgan and Nate. Morgancontributed $45,000 cash for a 50% partnership interest. Natecontributed property with a tax basis of $23,000 and a value of$45,000 for a 50% interest.
1. Assume the MN Partnership holdsthe property contributed by Nate for two years before its sale.(Assume straight-line depreciation and five years left on therecovery period.) How much annual depreciation will each partnerhave per the books and per the tax allocation assuming thepartnership uses the traditional method?
2. Redo part 1 assuming thepartnership is using the remedial method. What would thedepreciation allocation be in Year 1? (Assume straight-linedepreciation and with five years remaining on the asset. A newasset would have a 10 year useful life.) What would thedepreciation allocation be in Year 6?

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Solution 01 At the time of Nates contribution the equipment had a builtin gain of 22000 45000 FMV 23000 tax basis Partnership uses the traditional method for all of its Sec 704c property The equipment is depreciated straightline over 7 years with 5 years remaining Partnership would receive Sec 704b book and tax depreciation See Answer

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