G and H form Partnership GH. In year 1, both G and H contribute $100,000 each for
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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?
Related Book For
Financial Accounting Information for Decisions
ISBN: 978-1259533006
8th edition
Authors: John J. Wild
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