Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
It is also worthy to note that the partnership public image would be dented in the event that it is revived since most people will lack confidence with it.
Partnership Interest Acquisition
Basically, a partner can opt to dispose a partnership interest by sale to one or more of the other partners. Secondly, through selling it to a third party, thirdly, swapping or exchanging of the partnership interest for other property. Fourthly, a partner can transfer back to the partnership. In return s/he is expected to receive at least one liquidating distribution culminating to entire liquidation of the partnership interest. Fifthly, if he opts to retire, then he can dispose of his/her interest to any of the remaining partners. S/he may also choose to offer his/her interest as a gift or a donation. Lastly s/he can surrender it through desertion, penalty or even due to unworthiness of the partnership (Stephen, 2008, p.3).
Illustration
A to Z. is a two-member partnership for tax purposes. A to Z. has merely long-term capital assets and no liabilities. The basis of a to Z's assets is $100,000 and the fair market value is $200,000. The two partners Joel and Chris each own 50% of a to Z, and they each have a basis of $50,000 in their partnership interests. Chris purchases Joel's 50% interest in AB for $100,000 and continues to run a to Z. As a partnership. With regards to the general partnership tax rules, Joel's sale of her partnership interest in a to Z. To Chris could be taken to imply, firstly, Joel's sale and Chris's buying of a partnership interest, secondly, the lapsing of a partnership. It may also imply the allotment of partnership operating assets to Chris. Fourthly, it could imply contribution of the business running assets to Chris's to a sole business owner.
Similarly, it could also imply that Joel will be able to identify a $50,000 profit on the sale of her partnership interest. Moreover it signifies that Chris would take a $100, 000 basis that is the sum of money he paid to Joel in the new interest. Thirdly, Chris will identify no profit or loss on the insolvent in the distribution of property from the partnership. Fourthly, Chris would take a $50,000 basis in fifty percent of the property obtained in the liquidating distribution. Lastly it would imply Chris's holding period of all the property obtained in the distribution would comprise the time the property was held by partnership.
To elaborate further the above...
For state laws however, Chris carries on with the operation of the partnership. Chris ends up with one hundred percent of the partnership property. The fifty percent of this property came to him through the partnership liquidating distribution and fifty per cent through the acquisition of Joel's share of partnership assets. In the deemed liquidating distribution, Chris should encounter no gain or loss on the distribution. Chris's basis in the partnership property deemed disseminated would be the $50,000 basis of his partnership interest directly prior to the distribution (Micheal et al., 1996, p. 10).
From the above discussion, it is apparent that quite a number of problems do exist during the transfer of an interest from one partner to another. First and foremost in the event that one partner passes on; disagreements may erupt on the best method of doing this. Secondly a transfer of an interest of one partner to another reduces the ownership of this particular partner. Thirdly, queries may arise as to whether the transferor partner was responsible for recourse arrears, and if s/he is responsible for the arrears after the transference of the partnership interest. Fourthly, queries may also arise as to whether the degree to which the transferor partner's allocation of partnership non-recourse liabilities were presumed by or allotted to the partner who has purchased the interest. Lastly, another query would be whether the transferee took the partnership interest matter to recourse debt. Moreover their may also be misunderstanding as regards to matters pertaining the transference of the interest.
References
Fiona, Tolmie (ed.). (2003). Corporate and Personal Insolvency Law (2nd ed.). London:
Routledge-Cavendish;
Geoffrey, Morse (2006). Partnership Law. London: Oxford University Press.
Hans, Jurgen a. & Dince, H. (2004). Company and Partnership Insolvency. London: Butterworths Lawuk
10. VOLUNTARY TERMINATION. The partnership may be dissolved at any time by agreement of the partners, in which event the partners shall proceed with reasonable promptness to liquidate the business of the partnership. The partnership name shall be sold with the other assets of the business. The assets of the partnership business shall be used and distributed in the following order: (a) to pay or provide for the payment of
A partnership, once formed, acquires juridical personality separate and distinct from that of each of the partners. Therefore, a partnership may enter into binding contracts in its own name. Money, property and industry contributed into a common fund, whether invested at the time of formation or subsequent thereof becomes property of the partnership. Each partner shall be deemed co-owners of such property and shall have equal rights. Each partner shall
Accounting for Partnerships Businesses can be classified into various forms of ownership. In this text, I concern myself with partnerships. In so doing, I will discuss partnerships and the various advantages as well as disadvantages associated with this form of business ownership. Further, I will also highlight the Financial Accounting Standards (FAS) governing accounting for this form of business ownership from creation and operation to liquidation. Partnerships' tax consequences will also
Accounting for Partnerships Advanced Accounting Partnership is a legal business relationship between two or more people who agree to do business for the purposes of earning profit. It is considered as the most appealing option in setting up a new small scale business and growing it with the passage of time. In this business relationship, all the partners share profits and losses in an agreed ratio while assign the decision making powers
" Since their inception, a number of LLC statutes have been adopted across the country and becaue of the RULLCA initiative, the various jurisdictional disparities are slowly being replaced with more uniform approaches and interpretations. According to Greubner, LLCs have "evolved [into] a more of a distinct form and less of a hodgepodge of existing corporate and limited partnership rules." The LLC, though, remains a relatively new governance regime compared to the
Promissory estoppel is a term in the common law doctrine that is used by courts to implement promises made and consequently relied upon. This law doctrine is usually used when there is no formal contract though the involved parties have acted as if there is such a contract. As courts dictates the terms of how these promises should be implemented, they use this doctrine to enforce contract on the agreement