Allison and Taylor Form a Partnership by Each Making Contributions

question 56

Essay

Allison and Taylor form a partnership by each making contributions of $90,000 cash to partnership capital. The partnership purchases an asset for $600,000, using the cash and financing the rest with a $420,000 recourse note. The partners expect the partnership to have losses for the first three years of operations and profits thereafter. Allison is allocated 75% of partnership losses until the date when the total partnership profits exceed total partnership losses. After that date, the profits and losses are shared equally between the two partners. How will the recourse debt be shared between the partners for basis purposes immediately after the property is acquired?

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Definitions:

Social Situations

Environments or occasions where individuals interact with one another, often requiring social awareness and interpersonal skills.

Psychoanalytic Theory

A framework for understanding human behavior that focuses on the role of unconscious motives and conflicts, as proposed by Sigmund Freud.

Structuralism

A method of interpretation and analysis of aspects of human cognition, behavior, culture, and experience which focuses on relationships of contrast between elements in a conceptual system.

Behaviorism

A theory of learning which states all behaviors are acquired through conditioning processes influenced by the environment.