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 Felixs gain or loss and character thereof in two situations:
The partnership agreement provides for an allocation to goodwill upon liquidation of a partners interest; and
The partnership agreement does not provide for an allocation to goodwill.
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