1.) What result if A and B form an equal AB general partnership each contributing $5,000? The partnership borrows $90,000 on a recourse basis and purchases a building for $100,000 on January, year 1. Assuming the depreciating expense is $5,000 per year, and the parties agree that all depreciation will be allocated to A, what are their capital accounts on January 1, year 4? What are their tax bases? What results if the building is sold alternatively for $85,000, $100,000 and $70,000 to a purchaser and thereafter the partnership satisfies the liability?

2.) At the end of the partnership year when the amounts and character of income and deductions are certain, the ABC partnership allocates these items in the manner most advantageous from a tax standpoint so that economically, after taking into account tax effects, each partner receives an identical amount of after-tax profits. Assuming the capital accounts are properly adjusted and the partnership agreement provides that distributions will be in accordance with the capital accounts, will the allocation have substantial economic effect? What if the partners wanted to reallocate distributive shares on an amended tax return or a late return?