Is there any support for a partnership, once taking in a partner's new basis inside the partnership, to NOT allocate depreciation based on his higher basis entirely to that partner, and instead just sharing it equally among the partners? Seems totally wrong to me.
It is possible but only if there is a partnership agreement that specifically addresses how the distributive share of income, deductions, credits, etc. are allocated. If there is no agreement or an agreement is silent on this, then one looks to state law. Most of the states I have had occasion to look at, use the partner's capital account to make the allocation if there is no partnership agreement or the agreement is silent on this allocation.
In addition, any allocation must have "economic substance." In other words there must be an actual business or financial reason other than tax considerations, for an allocation to be valid.
Is this one of those? I don't have enough information to determine. But it certainly could be valid.
My guess it is laziness, ignorance, or the partner preparing the tax returns sees a personal advantage. I don't see any of these choices being of "economic substance".
Also: this business uses real property titled to the various family members. The real property is not titled to the partnership. Is it proper to show the real property inside the partnership? Shouldn't the partners be taking their depreciation outside the partnership? There is no written partnership agreement, and I am pretty sure none of this was ever discussed - it was just set up that way by the controlling and secretive partner years ago.
Note: when I say "controlling" I don't mean that partner has a controlling interest. He is just a bully.
If the property is not owned by the partnership, then this is probably not a FLP (family limited partnership) as the whole idea of FLPs is for the family members to contribute the property to the partnership. Additionally, if the partnership does not own the property then the property should not be an asset and the depreciation should not be a deduction of the partnership.
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