Question: A and B form the equal AB partnership. A contributes property (FMV = $200,000, basis = $150,000) and B contributes $200,000 cash. The partnership maintains

A and B form the equal AB partnership. A contributes property (FMV = $200,000, basis = $150,000) and B contributes $200,000 cash. The partnership maintains book value capital accounts under the Section 704(b) regulations. The property is depreciated straight line over a 5 year life for both book and tax purposes.

a. Calculate the tax basis and book value of A and Bs beginning balances in their capital accounts.

b. Using the traditional method under Code Sec. 704(c), how much of the first year tax depreciation will be allocated to A and B?

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