Question: Consider the following scenario: A , B , and C form the equal ABC partnership. Depreciation is allocated completely to C , and any distributions

Consider the following scenario:

,

,

and C form the equal ABC partnership. Depreciation is allocated completely to C

,

and any distributions in liquidation will be made according to the capital accounts of each partner. Partners are required to restore deficit capital accounts upon liquidation. The capital accounts of each partner are kept on a tax basis, so contributions and distributions of property are recorded in the capital accounts at the properties

bases.

Does the allocation of depreciation have an economic effect?

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