paul and anna plan to form the pa general partnership by the end of the current year 699217

Paul and Anna plan to form the PA General Partnership by the end of the current year. The partners will each contribute $80,000 of cash, and in addition, the partnership will borrow $240,000 from First State Bank. The $400,000 will be used to buy an investment property. The property will serve as collateral, and both partners will be required to personally guarantee the debt. The tentative agreement provides that 60% of operating income, gains, losses, deductions, and credits will be allocated to Paul for the first five years the partnership is in existence. The remaining 40% is allocated to Anna. Thereafter, all partnership items will be allocated equally. The agreement also provides that capital accounts will be properly maintained and that each partner must restore any deficit in the capital account upon the partnership’s liquidation. The partners would like to know, before the end of the tax year, how the $240,000 liability will be allocated for basis purposes. Using the format (1) facts, (2) issues, (3) conclusion, and (4) law and analysis, draft a memo to the tax planning file for the PA Partnership that describes how the debt will be shared between the partners for purposes of computing the adjusted basis of each partnership interest.