You need to record the depreciation expense on the training machine. Please note that the machine is deprecated using a 10 year life for both regular and "alternative minimum tax" depreciation. As noted in the facts, the machine's tax depreciation is $15,000 ($150,000 original cost divided by 10 years). If the machine's depreciation had been based on it's $100,000 FMV, the depreciation based on FMV would have been $10,000 ($100,000 FMV divided by the 5 year remaining life). You're going to have to figure out what to do and how to allocate the depreciation between the partners.