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Partner A contributed a building with a tax basis of $6,250,000 and a book value of $9,000,000 to the partnership. This building is encumbered by a nonrecourse mortgage of $10,000,000. The property was recently appraised at $12,500,000. Partner A's share of partnership profits is 25% and her share of partnership depreciation expense is 20%.

Partner A contributed a building with a tax basis of $6,250,000 and a book value of $9,000,000 to the partnership. This building is encumbered by a nonrecourse mortgage of $10,000,000. The property was recently appraised at $12,500,000. Partner A's share of partnership profits is 25% and her share of partnership depreciation expense is 20%.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Partner A contributed a building with a tax basis of $6,250,000 and a book value of $9,000,000 to the partnership. This building is encumbered by a nonrecourse mortgage of $10,000,000. The property was recently appraised at $12,500,000. Partner A's share of partnership profits is 25% and her share of partnership depreciation expense is 20%. What is the Code Sec. 704(b) minimum gain (if any) with respect to this property? How much of the Code Sec. 704(b) minimum gain is allocated to partner A? What is the Code Sec. 704(c) minimum gain (if any) with respect to this property? How much of the Code Sec. 704(c) minimum gain is allocated to partner A (the contributing partner)? How much of the remainder of the nonrecourse debt (excess nonrecourse debt) is allocated to partner A?
Transcribed Image Text:Partner A contributed a building with a tax basis of $6,250,000 and a book value of $9,000,000 to the partnership. This building is encumbered by a nonrecourse mortgage of $10,000,000. The property was recently appraised at $12,500,000. Partner A's share of partnership profits is 25% and her share of partnership depreciation expense is 20%. What is the Code Sec. 704(b) minimum gain (if any) with respect to this property? How much of the Code Sec. 704(b) minimum gain is allocated to partner A? What is the Code Sec. 704(c) minimum gain (if any) with respect to this property? How much of the Code Sec. 704(c) minimum gain is allocated to partner A (the contributing partner)? How much of the remainder of the nonrecourse debt (excess nonrecourse debt) is allocated to partner A?
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