How will the liability be allocated at the end of years

Assignment Help Accounting Basics

Reference no: EM132708634

Question - G and L form a limited partnership, G, the general partner, contributes $10,000 and L, the limited partner, contributes $90,000. The partnership purchases a building on leased land, paying $100,00 cash and borrowing $900,000 on a nonrecourse basis from a commercial lender, securing the loan with a mortgage on the building. The terms of the loan require the payment of market rate interest and no principal for the first ten years. Assume for convenience that the building is depreciable at the rate of $50,000 per year for twenty years, and that other partnership income equals expenses for the years in question. The partnership agreeement contains a qualified income offset, and G is required to make up any capital account deficit. Except as otherwise required by a minimum gain chargeback provision, the agreement allocates profit and loss 90% to L and 10% to G until such time as the partnership recognizes items of income and gain that exceed the items of deduction and loss that it has recognized over its life. Subsequent partnership income and losses are allocated equally between G and L. Assume that it is reasonably anticipated that ehe equal allocation will begin after ten years. The partnership agreement states that G and L each has a 50% interest in partnership profits for purposes of Section 752.

Required -

a. How is the $900,000 liability allocated in year one?

b. How will the liability be allocated at the end of year three?

c. How will the liability be allocated at the end of years one and three if excess nonrecourse liabilities are allocated in a ratio of 90% to L and 10% to G?

d. What result in (a) above, if the debt is guaranteed by G, who has no right to reimbursement from the partnership? Does the result change if G has a right to reimbursement from the partnership? What if G has a gross asset of only $6,000?

e. What result in (a), above, if the debt is guaranteed by L, and L as a right to reimbursement from the partnership?

f. What result in (a), above, if G is the lender?

Reference no: EM132708634

Questions Cloud

Find what will be the addition to retained earning : Find What will be the addition to retained earnings at the end of 2021. What will be the ending balance in retained earnings at the end of 2021?

Prepare any journal entries to record revenue arrangement : On March 1, 2020, iDevice Sellers signed 100 contracts, Prepare any journal entries to record the revenue arrangement for the iDevice bundle on March 1, 2020

How have the court systems in america dealt with reliability : What are some dynamics that impact the reliability of eyewitness information? How have the court systems in America dealt with the reliability factors.

What is tom effective annual rate : What is Tom's effective annual rate? Tom purchased 100 shares of Dalia Co. stock at a price of $123.93 four months ago. He sold all stocks today for $122.27.

How will the liability be allocated at the end of years : How will the liability be allocated at the end of years one and three if excess nonrecourse liabilities are allocated in a ratio of 90% to L and 10% to G

Develop mobile business opportunities : Technical features of mobile devices (e.g., smart phones) and how business can take advantage of them to develop mobile business opportunities

Write a critical analysis on the reliability and validity : Your assignment this week is to write a critical analysis on the reliability and validity of utilizing eye-witness testimony as a source of forensic evidence.

Calculate the total annual loan payment : Calculate the total annual loan payment, and break it into the amount of interest and the amount of principal paid for each year.

Discuss legal impossibility and factual impossibility : Discuss legal impossibility and factual impossibility and provide examples for both impossibility defenses. You are required to post an initial discussion post.

User Account

All Pages