K, G and L form a new partnership to operate a charter airplane company. K contributes...

 

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K, G and L form a new partnership to operate a charter airplane company. K contributes a plane with a tax basis of $800,000 and fair market value of $2,100,000 in exchange for a one-third interest. The plane is subject to a $600,000 liability, for which the partnership assumes responsibility. G contributes a second plane with a tax basis of $1,100,000 and a book value of $1,500,000 in exchange for a one-third interest. L contributes $1,500,000 cash in exchange for the remaining one-third interest. Assume that both planes have remaining useful lives for book and tax purposes of 10 years and that the partnership uses the straight-line method to compute depreciation. a. Show how the partnership will allocate tax depreciation among the partners using the traditional method under Code Sec. 704(c). Assume that the partnership agreement allocates all items of income, deduction, gain and loss equally among the partners. b. How would depreciation expense be allocated if the partnership uses the traditional method with curative allocations under Code Sec. 704(c)? (Assume the partnership had gross rental income of $120,000 from its charter activity in the current year). c. How would depreciation be allocated if the partnership uses the remedial allocations method under Code Sec. 704(c)? Do a separate calc for a, b & C. Don't work them off each other. K, G and L form a new partnership to operate a charter airplane company. K contributes a plane with a tax basis of $800,000 and fair market value of $2,100,000 in exchange for a one-third interest. The plane is subject to a $600,000 liability, for which the partnership assumes responsibility. G contributes a second plane with a tax basis of $1,100,000 and a book value of $1,500,000 in exchange for a one-third interest. L contributes $1,500,000 cash in exchange for the remaining one-third interest. Assume that both planes have remaining useful lives for book and tax purposes of 10 years and that the partnership uses the straight-line method to compute depreciation. a. Show how the partnership will allocate tax depreciation among the partners using the traditional method under Code Sec. 704(c). Assume that the partnership agreement allocates all items of income, deduction, gain and loss equally among the partners. b. How would depreciation expense be allocated if the partnership uses the traditional method with curative allocations under Code Sec. 704(c)? (Assume the partnership had gross rental income of $120,000 from its charter activity in the current year). c. How would depreciation be allocated if the partnership uses the remedial allocations method under Code Sec. 704(c)? Do a separate calc for a, b & C. Don't work them off each other.