Partnership Taxation Liquidation and Goodwill Discussion
Partnership Taxation Liquidation and Goodwill Discussion
Computation question
The Rascals Company is a general partnership with four partners: Felix, Eddie, Gene, and Dino. Felix is planning to retire. Its balance sheet is:
|
Tax Basis |
FMV |
|
|
Cash |
160,000 |
160,000 |
|
Accts. Rec. |
1,000,000 |
|
|
Equipment |
0 |
100,000 |
|
Intangible |
130,000 |
0 |
|
Unrecorded goodwill |
0 |
Unknown |
|
Total |
290,000 |
Unknown |
|
Accts Payable |
0 |
501,000 |
|
Loan ( not guaranteed) |
110,000 |
110,000 |
|
Other Liabilities |
17,000 |
17,000 |
|
127,000 |
628,000 |
|
|
Capital- Felix (25%) |
33,000 |
359,000 |
|
Capital- Eddie, Gene & Dino (75%) |
130,000 |
Unknown |
|
Total |
290,000 |
Unknown |
Felix is retiring from the partnership. The partnership pays him $359,000 in cash as complete liquidation of his partnership interest. Determine the fair market values of the unknown numbers above, determine Felix’s gain or loss and character thereof in two situations:
- The partnership agreement provides for an allocation to goodwill upon liquidation of a partner’s interest; and
- The partnership agreement does not provide for an allocation to goodwill.
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