Partnership

Question 1

Retirement of a partner from a partnership

Answer 1

Payments made in liquidation of the interest of a retiring partner are considered a distribution by the partnership. Therefore, a retiring partner continues as a partner until his interest has been completely liquidated.

Question 2

Define Guaranteed payment of a partnership

Answer 2

Guaranteed payments are payment for partners for services rendered or the use of capital without regard of partnership income

Question 3

Non-liquidating distribution to partner?

Answer 3

• Nontaxable.
• Basis used is the NBV asset taken. Stop at zero.
  Basis never below 0.

Question 4

Liquidation distribution?

Answer 4

• Nontaxable liquidation when zero out partnership interest/basis, allocate asset to withdrawn.
• Basis used is the partnership interest.
• Gain recognized to the extend that money received exceeds the basis.

Question 5

Sale of partnership interest calculation?

Answer 5

Beginning capital account
\+ % of income/ (loss) up to sale
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
= Capital account at sale date
\+ % liability relieved
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
= Adjusted basis
- Amount received
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Capital gain/ (loss)

Question 6

Hot assets

Answer 6

Unrealized receivable
Appreciating inventory
–> Ordinary Income

Question 7

Will a partner who devote his time and energy to a partnership business be entitled to compensation if the agreement is silent?

Answer 7

No. Partners are entitle to share of profit and loss, not entitle to compensation unless agree in the agreement or in case of winding up by the surviving partner