A limited partnership consisting of A, B, and C purchased a building for $100,00

Question

A limited partnership consisting of A, B, and C purchased a building for $100,000 paying $30,000 cash and taking a non-recourse mortgage of $70,000. Depreciation of the building is $10,000 per year. Their interest in profits and losses are 20%, 40%, and 40%. The partnership agrees to allocate recourse deduction equally (33 1/3%) to each partner. Assume the allocations of non-recourse deductions will be respected. The partnership agreement complies with the alternative test for economic effect and contains a minimum gain chargeback provision. Each partner's capital account on 1/1 of year 1 is $10,000.

a) What is the partnership minimum gain for year 4?

b) What are the non-recourse deductions for year 4?

c) How are non-recourse deductions allocated for year 4?

d) What is each partner's share of partnership minimum gain at the end of year 4?

Explanation / Answer

a) the partnership minimum gain for year 4 is $10000

b) the non-recourse deductions for year 4 is $10000

c) non-recourse deductions allocated for year 4 is $10000

d) each partner's share of partnership minimum gain at the end of year 4 are as below :-

A- $3333, B - $3333 & C - $3333

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