| Course | ACCT 616 Advanced Topics in Individual and Pass-through Taxation (ACCT616) |
|---|---|
| Module/Week | 3 |
| Assignment | Case Study 2 |
| Paper type | Case study |
| Length | about 495 words, 2 double-spaced pages plus title page and references. Course guide: a case of up to two pages on Section 704(c), in APA form with its running head, title page and a reference list that names at least 2 professional or scholarly works apart from the textbooks and Bible |
| Format | APA 7 student paper |
| Points | 100 |
| School | Liberty University Online |
| Program | MS in Accounting |
| Where it sits | Module/Week 3 in Liberty's published ACCT 616 course guide; current sections can differ |
| Updated | October 2026 |
Free sample paper for ACCT 616 Week 3
Allocating Depreciation on Contributed Equipment: The Ceiling Rule and the Choice Among Section 704(c) Methods
[Student Name]
School of Business, Liberty University
ACCT 616: Advanced Topics in Individual and Pass-through Taxation
Case Study 2
[Instructor Name]
[Date]
The partners, equipment and figures are a composite written for this sample; the Code section, regulations, article and Bible passage cited are real.
Allocating Depreciation on Contributed Equipment: The Ceiling Rule and the Choice Among Section 704(c) Methods
The Facts
Grant contributes packaging machinery worth $90,000, with an adjusted basis of $30,000 and three years of straight-line recovery remaining, to a new partnership. Lina contributes $90,000 of cash. They share profits and losses equally. The partnership will use the machinery for its full remaining life.
Book and Tax Depreciation
Tax depreciation follows the partnership's carryover basis: $30,000 over three years, or $10,000 a year. Book depreciation must bear the same relationship to the $90,000 book value that tax depreciation bears to tax basis, so it is $30,000 a year (Treas. Reg. § 1.704-1, 2025). Each partner is charged $15,000 of book depreciation annually.
The Traditional Method and the Ceiling Rule
Under Section 704(c), items from contributed property must be shared so that the gap between its value and its basis on the day it came in is taken into account (I.R.C. § 704, 2025). Under the traditional method, Lina, the noncontributing partner, should receive tax depreciation equal to her $15,000 book share, but the partnership has only $10,000 of tax depreciation in total. All $10,000 goes to Lina, and Grant receives none (Treas. Reg. § 1.704-3, 2025). Lina is $5,000 short each year, $15,000 over the three years, and when the machinery is fully depreciated, her capital account and her tax basis will no longer agree. The ceiling rule lets a partner's book loss outrun the tax deduction behind it.
Curative and Remedial Allocations
The regulations allow two cures. Under the traditional method with curative allocations, the partnership allocates $5,000 a year of other actual tax items, for example $5,000 less of ordinary income to Lina and $5,000 more to Grant, so that Lina's tax position matches her book position. That works only if the partnership has enough income of the right character. Under the remedial method, the partnership creates notional items instead, a depreciation deduction for Lina and an equal amount of ordinary income for Grant, so the fix works even in a year with little other income; book depreciation on the excess value is then recovered over a new period, which changes the annual figures (Treas. Reg. § 1.704-3, 2025).
Distributions Within Seven Years
If the partnership distributes the machinery to Lina within seven years of the contribution, Grant recognizes the remaining built-in gain as if the property had been sold (I.R.C. § 704, 2025). Orbach (2004) shows how these rules still follow contributed property even after a partnership merger, so the clock deserves a note in the partnership's records.
Recommendation
Christ taught that people should treat others the way they want to be treated (English Standard Version Bible, 2001/2016, Matthew 7:12). Lina paid full value for her half of the business, and a method that leaves her $15,000 short of deductions does not honor that bargain. The partners should adopt curative allocations if the partnership's ordinary income is reliable, or the remedial method if it is not, and record the choice in the partnership agreement. Writing the method down now also protects both partners if either later sells an interest, since a buyer inherits the allocation scheme along with the capital account.
References
English Standard Version Bible. (2016). Crossway. (Original work published 2001)
I.R.C. § 704 (2025).
Orbach, K. N. (2004). The application of Sections 704(c)(1)(B) and 737 after an assets-over partnership merger: An analysis of Revenue Ruling 2004-43. The ATA Journal of Legal Tax Research, 2(1), 40-48. https://doi.org/10.2308/jltr.2004.2.1.40
Treas. Reg. § 1.704-1 (2025).
Treas. Reg. § 1.704-3 (2025).
What the ACCT 616 Week 3 instructions ask
The second case study in ACCT 616 falls in Module/Week 3, together with Discussion Board Forum 2 and a reading of chapters 6, 7 and 8 of Ricketts and Tunnell with a presentation. Again the facts come in the instructions; the reply may use one page or a second, set out under APA rules with a running head on the title page and a reference list to finish. Sources must include two or more scholarly or professional works besides the textbooks and the Bible, which for an allocation question means the Code and the Section 704 regulations at minimum. The case builds directly on formation: once a partner contributes appreciated property, the partnership must decide how to share the tax consequences of that appreciation for as long as it owns the asset.
How this ACCT 616 Week 3 example is built
The paper opens by stating the contribution and the partners' equal shares, then computes the two depreciation figures that drive everything, book depreciation of $30,000 a year and tax depreciation of $10,000. A second section applies the traditional method and shows the ceiling rule at work: the cash partner should receive $15,000 of tax depreciation to match the book share but can receive only $10,000. The third section compares the two cures the regulations allow, curative allocations of other items and remedial allocations of notional items, and states what each costs the contributing partner. A short paragraph on the seven-year rules follows. The paper closes with a recommendation, framed by the teaching that partners should treat each other as they would want to be treated.
ACCT 616 Week 3 grading rubric: where the points go
The grading for this case concentrates on correct book and tax depreciation figures, an accurate explanation of the ceiling rule, and a defensible choice among the traditional, curative and remedial methods, each cited to the regulations. Instructors also look for recognition that the method is chosen property by property and must be reasonable, and for awareness of the related rules on later distributions. Formatting counts here as in the other cases: two pages at most, clean APA handling of the running head and every reference entry, and two or more outside professional or scholarly sources. A recommendation with no reason attached leaves points on the table.
ACCT 616 Week 3 help: mistakes that cost points
Compute book depreciation from the property's agreed value, not its tax basis, so that book and tax depreciation keep the same ratio to their bases. Then ask what the noncontributing partner should receive for tax purposes, its book share, and what the partnership actually has to give, which is limited by the tax depreciation available. That shortfall is the ceiling rule. Explain how a curative allocation uses other real tax items and how the remedial method creates offsetting notional items. Say which method you recommend and why, perhaps fairness, simplicity or the length of the remaining life. Mention that distributing the property to the other partner within seven years triggers the built-in gain, and cite each rule.
Related ACCT 616 sample papers
Other ACCT 616 weeks
- ACCT 616 Week 1: Discussion Board Forum 1
- ACCT 616 Week 2: Case Study 1
- 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
More MS in Accounting sample papers
- ACCT 521 Week 3: Individual Paper
- ACCT 531 Week 3: Forum Replies 2
- ACCT 612 Week 3: Tax Research Memo 2
- ACCT 614 Week 1: Case Study 1
ACCT 616 Week 3 questions, answered
What is ACCT 616 Case Study 2?
Worth 100 points and handed in during Module/Week 3 while Forum 2 is open, it is a paper worked from the instructions' facts about contributed property, in no more than two APA pages.
Where can I find a free ACCT 616 Week 3 sample paper?
A complete ACCT 616 Week 3 case study sample is on this page, allocating depreciation on contributed equipment under Section 704(c) and comparing the traditional, curative and remedial methods.
What is the ceiling rule in partnership taxation?
It is the cap, under the traditional Section 704(c) method, that holds each partner's tax items to what the partnership really generated, so a partner who did not contribute the property can come up short.
What is the remedial allocation method?
A Section 704(c) method in which the partnership creates offsetting notional tax items, a deduction for the noncontributing partner and equal income for the contributing partner, to cure ceiling rule distortions.
What else is due in ACCT 616 Module/Week 3?
Discussion Board Forum 2 runs the same week, so a thread and two replies are owed too, while Ricketts and Tunnell's chapters 6 through 8 and a presentation make up the reading.
Use it as a model, or ask for your own
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