Liquidating partnership with capital deficiency


Gerloff, Chu, and Jewett Statement of Partnership Liquidation (Label) 1 Cash Noncash Assets = Liabilities Capital, Gerloff (2/4) Capital, Chu (1/4) Capital, Jewett (1/4) 2 3 4 5 6 7 8 Balances 9 10 Journal 2.Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. 28 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. DEBIT CREDIT 1 2 3 4 5 6 1) Partner with capital deficiency brings in cash: STATEMENT OF LIQUIDATION Non cash Capital Cash ( ) assets (=) Creditors ( ) William ( ) Joshua ( ) Courtney Balances before liquidation 5,600 54,240 14,500 19,180 4,020 22,140 Sale of non cash assets...Liquidating Partnerships—Deficiency Prior to liquidating their partnership, Short and Bain had capital accounts of ,000 and ,000, respectively. Determine the amount distributed to Bain, assuming Short is unable to satisfy the deficiency.As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.

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Therefore, partners who have held an interest in the partnership for more than one year as of the date of a liquidating distribution will pay lower rates of tax on the gain than they do on a partnership's operating profit.When the total amount of cash distributed is more than a partner's basis in her partnership interest, the difference in the two amounts is a gain.A loss results when the liquidating distribution is less than the partner's basis in the partnership.Regardless of the amount of cash you receive, your basis in the distributed property is never less than zero.If your basis is zero, this means the amount you eventually sell the property for is all taxable gain.Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash.

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