Question 4 (18 points). Do not allow you answers to go beyond the right side of the page. Treasury Reg. 1.752-3(a)(1) requires that nonrecourse liabilities secured by contributed property must be

allocated to the contributing partner to the extent of any minimum gain. Treasury Reg. 1.752-3(a)(3) privides the the partnership agreement may provide that such lianilities may be allocated to the contributing partner to the extent of the entire pre-contribution gain. Please articulate the policy reason why the latter option is available. a. b. A nonrecourse liability is one for which no partner or certain related persons can be held personally liable. Please articulate why policy allows an nonrecourse liability to be treated as cash contributed and included in the partners' bases./nC. d. e. The qualified business income deduction applies to income passing through from pass thru entities, but not o salaries collected by the business owner. Many business owners elect to operate as an S corporation rather than a partnership. Please explain what you think is the prevailing incentive to do so. There are three requirements that must be met for an allocation under IRC 704(b) to have "economic effect." The last is that in the event of a deficit in a partner's capital account upon liquidation, the deficit must be "restored" to the partnership. Please explain the effect of the allocation and the deficit restoration requirement in economic terms. Recourse libilities of a partnership must be allocated amongst the partners under the "doomsday scenario." Please explain the economics (i.e., plocay reason) of this requirement,