Problem:
Al contributed $620,000 and Brett contributed $20,000 in cash to from a partnership is a general partner and Brett is a limited partner. The partnership purchased a parcel of land for $40,000 and constructed an office building for $600,000 Assume that the property has a 40 year cost recovery period under 168 and the depreciation method is straight- line. Thus, the annual depreciation deduction is $15,000 The partnership's annual rental income exactly equals its deductible cash flow operating expenses, with the result that net partnership taxable income for each year is a loss of $15,000 , which is attributable to the depreciation . The partnership agreement allocates all items of income and loss equally, except the depreciation deductions, which are allocated entirely to Brett Both partners are unconditionally obligated to restore any deficit to their capital accounts upon a liquidation of the partnership Assume the other requirements of 704 b are satisfied. -. If the partnership sold the land and building for $760,000 on the first day of the third year and liquidated , how much of the proceeds will be distributed to Brett?