Alex, Betty and Charles are each one-third partners for profits, losses and capital in the ABC Partnership, a cash basis calendar year partnership. On 1/1/X1 each of the partners contributed the following properties in exchange for his/her partnership interest: Alex contributed raw land to ABC at a time when his adjusted basis in the land was $150 and its fair market value was $300. Betty contributed non-traded private stock with a basis of $900 and fair market value of $300. Betty had owned the stock for 5 years and it will be held by the partnership for investment purposes. Charles contributed depreciable office equipment with an adjusted basis of $100 and fair market value of $300. Charles had purchased the equipment 4 years prior to the date of contribution at a cost of $500. Assume Charles had depreciated the property over the 4 years using a 5-year straight-line method. Assume further no depreciation convention applied and that the depreciation taken was otherwise correctly computed. Assume the partnership adopted the Traditional Method of accounting for tax purposes to take into account book-tax variations under Code section 704(c).

describe the partnership uses the same depreciation method and recovery period for book

Answer rating: 100% (QA)

Answers To solve this problem we need to understand the tax implications of the property contributions made by the partners to the ABC Partnership Giv... View the full answer