| Course | ACCT 616 Advanced Topics in Individual and Pass-through Taxation (ACCT616) |
|---|---|
| Module/Week | 2 |
| Assignment | Case Study 1 |
| Paper type | Case study |
| Length | about 493 words, 2 double-spaced pages plus title page and references. Course guide: one to two pages answering the formation scenario, APA style, a running head on the title page, and two or more scholarly or professional references on top of the textbooks and Bible |
| Format | APA 7 student paper |
| Points | 100 |
| School | Liberty University Online |
| Program | MS in Accounting |
| Where it sits | Module/Week 2 in Liberty's published ACCT 616 course guide; current sections can differ |
| Updated | October 2026 |
Free sample paper for ACCT 616 Week 2
Contributing a Mortgaged Building to a New Partnership: Basis, Liability Shifts and the Gain That Waits Under Section 704(c)
[Student Name]
School of Business, Liberty University
ACCT 616: Advanced Topics in Individual and Pass-through Taxation
Case Study 1
[Instructor Name]
[Date]
The partners, property and figures are a composite written for this sample; the Code sections, regulations and Bible passage cited are real.
Contributing a Mortgaged Building to a New Partnership: Basis, Liability Shifts and the Gain That Waits Under Section 704(c)
The Facts
Elena Ruiz and Marcus Bell form Ruiz Bell Storage, a general partnership in which they share profits and losses equally. Elena contributes a warehouse she has owned for six years, worth $500,000, with an adjusted basis of $200,000 and subject to a $300,000 recourse mortgage that the partnership assumes. Marcus contributes $200,000 of cash. Both partners sign as guarantors of the mortgage, and the partnership agreement shares losses equally, so each partner would bear half of the debt if the partnership could not pay.
Is the Contribution Taxable?
Section 721 says that neither Elena nor the partnership recognizes anything when she trades the warehouse for her interest (I.R.C. § 721, 2025). Elena's $300,000 of built-in gain is deferred, not erased.
Each Partner's Basis
A partner's basis in a contributed interest begins with the basis of the property contributed, $200,000 for Elena and $200,000 for Marcus (I.R.C. § 722, 2025). The mortgage then moves. Elena is relieved of the $300,000 debt, which is treated as a distribution of money to her, and each partner's share of a partnership liability is treated as a contribution of money (I.R.C. § 752, 2025). For a recourse debt, a partner's share is the part of the debt for which that partner bears the economic risk of loss (Treas. Reg. § 1.752-2, 2025). Here each bears half, $150,000. Elena's basis is therefore $200,000 less $300,000 plus $150,000, or $50,000. Marcus's basis is $200,000 plus $150,000, or $350,000. Because Elena's net decrease of $150,000 is less than her $200,000 basis, she recognizes no gain (I.R.C. § 731, 2025).
The Partnership's Basis
The partnership takes Elena's $200,000 basis in the warehouse (I.R.C. § 723, 2025), and because the warehouse was a capital or Section 1231 asset in her hands, her six-year holding period carries over. The partnership's inside basis, $200,000 for the warehouse plus $200,000 of cash, equals the partners' combined outside bases, $50,000 for Elena and $350,000 for Marcus, which is a quick check that the debt has been counted once and only once.
If the Mortgage Had Been Larger
Suppose the mortgage had been $450,000. Elena's relief would be $450,000 and her half share $225,000, a net decrease of $225,000 against a $200,000 basis. The $25,000 excess would be gain recognized on formation, and her basis would fall to zero (I.R.C. § 731, 2025). Debt is the one thing that can turn a tax-free contribution into a taxable one.
The Gain That Waits
Book value and tax basis differ by $300,000 at formation, and Section 704(c) requires the partnership to allocate that pre-contribution gain to Elena when the warehouse is sold, so Marcus is not taxed on appreciation that arose before he joined (I.R.C. § 704, 2025).
A Word on the Guarantee
Proverbs warns the reader who has put up security for a neighbor to go and settle the matter quickly (English Standard Version Bible, 2001/2016, Proverbs 6:1-3). Marcus has guaranteed half of a debt that came with Elena's building. The partners should put in writing how they would bear a default, so the tax allocation of the debt matches a commitment both understand.
References
English Standard Version Bible. (2016). Crossway. (Original work published 2001)
I.R.C. § 704 (2025).
I.R.C. § 721 (2025).
I.R.C. § 722 (2025).
I.R.C. § 723 (2025).
I.R.C. § 731 (2025).
I.R.C. § 752 (2025).
Treas. Reg. § 1.752-2 (2025).
What the ACCT 616 Week 2 instructions ask
Case Study 1 comes due in the second module/week of ACCT 616, together with Quiz 1, while the class works through Ricketts and Tunnell's fourth and fifth chapters with a presentation. The scenario sits in the instructions, and the response may fill one page or two; in APA terms that means a running head on a title page, the analysis, then a list of references. That list must show two or more scholarly or professional sources, beyond the textbooks and the Bible, so the Code and Treasury regulations normally carry the analysis. A formation case comes this early because every later topic in the course, allocations, distributions and sales, depends on the basis numbers fixed on the day the partnership begins.
How this ACCT 616 Week 2 example is built
The sample sets the facts out in one paragraph with every figure a reader needs to check the work. It then answers four questions under their own headings: whether the contribution is taxable, what each partner's basis in the partnership is after the mortgage moves, what basis and holding period the partnership takes in the building, and what would change with a larger mortgage. Each computation appears in a sentence with its source, so a grader can follow the arithmetic without a table. A short closing section turns from the tax result to the relationship between the partners, since the other partner has guaranteed half of a debt that came in with the building, and uses Proverbs to frame that commitment.
ACCT 616 Week 2 grading rubric: where the points go
Instructors grade ACCT 616 case studies on the accuracy of each computation, correct citation of the Code section or regulation that produces each result, and a clear structure that answers what the scenario asks. In a formation case, the marks concentrate on the outside basis figures, the treatment of the mortgage as both a deemed distribution and a deemed contribution, and recognition of the built-in gain the contributing partner carries. Format earns its share too, from the page count of one or two to the running head, and the references must reach past the textbooks and Bible to two or more scholarly or professional works. A paper that reports the right final number without showing how the liability shift produced it earns partial credit.
ACCT 616 Week 2 help: mistakes that cost points
Start with each partner's basis in what they contributed, then adjust for the debt in two steps: subtract the whole liability the contributing partner is relieved of, and add back that partner's share of the partnership's liabilities. If the net decrease exceeds basis, the excess is gain. Decide first whether the mortgage is recourse or nonrecourse, because the regulations share the two kinds differently. Remember the partnership takes the contributor's basis in the property and tacks the holding period. Note the built-in gain, since Section 704(c) will assign it back to the contributor on a sale. Show each figure with its source and keep the paper within two pages.
Related ACCT 616 sample papers
Other ACCT 616 weeks
- ACCT 616 Week 1: Discussion Board Forum 1
- ACCT 616 Week 3: Case Study 2
- ACCT 616 Week 4: Discussion Board Forum 3
- ACCT 616 Week 5: Case Study 3
- ACCT 616 Week 6: Discussion Board Forum 4
- ACCT 616 Week 8: Case Study 4
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- ACCT 521 Week 1: Discussion Board Forum 1
- ACCT 531 Week 2: Article Critique 1
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ACCT 616 Week 2 questions, answered
What is ACCT 616 Case Study 1?
The 100-point first case study, due in Module/Week 2 with Quiz 1, on a formation scenario from the instructions, written in one or two APA pages that rest on the Code and regulations.
Where can I find a free ACCT 616 Week 2 sample paper?
This page has a complete ACCT 616 Week 2 case study sample on contributing a mortgaged warehouse to a new partnership, with basis, liability shifts and Section 704(c) gain.
Is contributing property to a partnership taxable?
Generally not. Section 721 provides that neither the partnership nor any partner recognizes gain or loss on a contribution of property for a partnership interest, with exceptions such as excess liability relief.
How does a mortgage affect a contributing partner's basis?
The partner's basis falls by the whole debt the partnership assumes and rises by the partner's share of it, and if the net decrease exceeds basis, the excess is gain under Section 731.
What else is due in ACCT 616 Module/Week 2?
Quiz 1, an open-book set of 25 multiple-choice items, closes the same Friday, and chapters 4 and 5 of Ricketts and Tunnell plus a presentation form the reading.
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