Question
The XYZ partnership had the following balance sheet: Basis FMV Cash $30,000 $30,000 Accounts Receivable 0...
The XYZ partnership had the following balance sheet:
|
Basis |
FMV |
|||
|
Cash |
$30,000 |
$30,000 |
||
|
Accounts Receivable |
0 |
48,000 |
||
|
Land |
36,000 |
93,000 |
||
|
Goodwill |
0 |
15,000 |
||
|
$66,000 |
$186,000 |
|||
|
Capital, X |
$22,000 |
$62,000 |
||
|
Capital, Y |
22,000 |
62,000 |
||
|
Capital, Z |
22,000 |
62,000 |
||
|
$66,000 |
$186,000 |
|||
In liquidation of his interest X receives a distribution equal to 50% of partnership income for each of the first two years after his retirement. Partnership income was $80,000 in each of those years. X was a general partner, capital was not a material income-producing factor for the partnership, and the partnership agreement specified that a retiring partner would be paid for their share of goodwill. How would the retirement payment be treated by X and the partnership?
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