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Personal home on partnership books

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2-May-2014 8:09am
Jacksonville, Florida
I have engaged with a 5 partner partnership, all related.

For 4 years they have had a personal home on books, never depreciated, expenses don't appear to ever have been deducted. They have treated as investment property, but the brother lives there with his family.

According to property tax records this is owned by the brother who resides there. They want to treat everything equal as partners, and they are fine with this arrangement. He is the only one who is a US citizen, if that has any consequences.

How do I handle?

Can I propose taking off books as a distribution at book value, since it should have never been recorded to the books (asset not owned by partnership), or do I need to distribute at FMV? This is currently estimated to be a one million dollar property with book basis of $600k. No debt. It was originally booked with debit to building and a credit to cash.

Any guidance or other issues to consider would be very much appreciated.

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