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Business Insurance Life Part VII - Business Partnerships - Disposition of Partnership Interest


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When the partners cease to carry on business together, this is known as dissolution. If the business ceases to do business, it is said to be “wound-up". This involves the liquidation of the company property, payment of debts and distribution of the net proceeds. In fact, the dissolution of the partnership does not automatically lead to a wind-up of the business. It may be restructured as a new partnership, sole proprietorship, or even as a corporation, providing all parties are in agreement. It may be caused by following factors

1. Expiration of term
2. Termination of undertaking.
3. Death of a partner.
4. Insolvency of a partner.
5. Any event that makes it unlawful.

What is Disposition of Partnership Interest
The cost of partnership interest is the purchase price plus expenses incurred to gain it. Property transferred to the partnership or P. I. and is valued at Fair Market Value. The Partnership interest is the cost of partnership plus share of gains and capital contributions minus all losses and distribution of profits or gains.

Disposition of partnership interest can occur, when
1. sale of P. I. to an outsider.

The fair market value (F. M. V. ) is generally the sale price.

2. at wind-up.
The disposal may result in a partnership gain or loss, including recaptured capital cost allowance. This realization then flows through to each partner.

3. withdrawal of a partner.
the partnership is disposed of due to the disillusionment or retirement of a partner, the partnership interest can be sold to existing partners.

4.death of a partner.
If the partnership is wound-up, the fair market value received by the estate becomes the proceeds for the partnership interest. If the partnership is sold, the sale price becomes the proceeds of disposition.

5. property transfers.
When a property transfer occurs, the property transfers at the F. M. V. as to partnership property and interest. This results in a capital gain or loss to the partners.

Kyle J. Norton

All rights reserved. Any reproducing of this article must have all the links intact.

I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990


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