On January $1,2022,$ G and L formed a limited partnership to acquire and operate a rental

apartment building. L$,$ the limited partner, contributed $$135$ and G$,$ the general partner,

contributed $$15.$ The partnership obtained a nonrecourse loan from an unrelated financial

institution for $$850$ and purchased a building for $$1,000$ on leased land. The loan is secured by

the building. The loan requires interest to be paid currently, but does not require any principal

payments for $25$ years. The building is depreciable over $10$ years at the rate of $$100$ per year.

The partnership agreement satisfies the first two requirements of the basic test for economic

effect $($i$.$e$.,$ the capital account and liquidation requirements$).$ L has no obligation to make up

any deficit in her capital account. The partnership agreement, however, does have a QIO

provision. It also has a "minimum gain chargeback" provision as described in $1.704-2($f$).$ The

partners agree that nonrecourse deductions will be shared equally. Finally, the agreement

provides that all items of income, deduction and loss, other than nonrecourse deductions, will

be allocated $90\%$ to L and $10\%$ to G until the first time that income and gain exceed losses taken

in prior years. Thereafter, all items of income, gain, and loss will be allocated equally between

the partners.

For the taxable years $2022-2024,$ the partnership has $$70$ of gross rental income and $$70$ of out

of pocket expenses $($$$60$ in interest and $$10$ in operating expenses$).$ As a result of the

depreciation deduction on the building, the partnership has an annual net tax loss of $$100$ each

year. During this period, the partnership makes no distributions.

a$.$ What are G$$s and L$$s initial outside bases in the partnership?

b$.$ How should the partnership allocate the $$100$ loss for $2022$ between G and L$?$

c$.$ How should the partnership allocate the $$100$ loss for $2023?$

d$.$ At the end of $2023$ does L have a potential QIO problem, i$.$e$,$ is the partnership$$s

qualified income offset provision triggered with respect to L$?$

e$.$ How should the partnership allocate the $$100$ loss for $2024?$

f$.$ On January $1,2025$ the partnership transfers the building to the lender in complete

satisfaction of its obligation under the mortgage. What are the tax consequences to

the partnership, G and L$?$ Ignore any possible depreciation for $2025$

Justify your answer with any applicable tax code, Be specific!