Frank, Greta, and Helen each have a one-third interest in the FGH Partnership. On December 31, 2014, the partnership reported
The partnership placed Asset 1 (seven-year property) in service in 2012 and Asset 2 (five-year property) in service in 2013. The partnership did not elect Sec. 179 expensing and elected out of bonus depreciation in both years. Accordingly, it computed the assets adjusted bases at December 31, 2014 as follows:
On January 2, 2015, Helen sold her partnership interest to Hank for $190,000. At the time of sale, the partnership had a Sec. 754 optional basis election in effect but has not elected to use the remedial method for allocating partnership items.
The partners have asked you to determine (1) the amount and character of Helens gain or loss; (2) Hanks optional basis adjustment and its allocation to Asset 1 and Asset 2; and (3) the amount of depreciation allocated to Hank in 2015, including the effects of the optional basis adjustment. At a minimum, you should consult the following resources:
¢ IRC Secs. 743 and 751
¢ Reg. Sec. 1.743-1(j)
¢ Reg. Sec. 1.755-1
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