This scenario needs to be answered using IRC tax codes and please describe how answers were arrived at and which tax code it applies to:
Bob, Joe, Sam, and Cassie operate an equal partnership.
Joe contributed a building (basis of $75,000 and FMV $100,000) at the time of contribution and has held it as a capital asset prior to the contribution. The building was depreciated by the partnership for tax purposes using the straight-line method at a rate of $1,923 per year with a life of 39 years. After five years worth of depreciation had been allowed with respect to the building and at a time when it was valued at $115,000, it was distributed to Sam as a non-liquidating distribution.
The partnership is also thinking of distributing a second building to Joe that it purchased for $120,000 at the same time Joe originally contributed the first building. The second building was also depreciated using the straight-line method over 39 years and is now worth $115,000.
How much depreciation is allocated to each partner per year for tax purposes with respect to the first building?
How much depreciation is allocated to each partner per year for purposes of maintaining their capital account balances with respect to the first building?
What impact does the distribution of the first building have on Joe in terms of his basis in the partnership and his capital account?
What impact does the distribution of the first building have on Sam and his basis in his partnership interest and his capital account?
If the partnership decides to distribute the second building to Joe immediately after its distribution of the first building to Sam, what impact would that have on Joe?