[futuremdcpa]

Hey guys,

Is this answer right? I would think that a partnership would terminate when it ceases to have more than 2 people:

On January 1, 2012, the partners interest in the capital and profits and losses of Mulford Partnership were:

Rick: 25%

Tim: 20%

Jon: 55%

On January 7, 2012 Tim sold his entire interst to an unrelated person. Rick sold his 25% interest in Mulford to another unrelated person on July 7, 2012. No other transfers of partnership interests took place during 2012. For tax purposes, which of the following statements is correct with respect to the Mulfrod Partnership?

Wiley Answer: Mulford did not terminate.

My answer: Muford terminated as of July 7 2012 (when 2 out of 3 partners sold their p-ship interests).

REG: PASS || BEC: PASS || AUD: PASS || F: SCORE PENDING..

[gans555]

The partnership will continue, there is no termination. This is because there remains to be 3 partners, Tim and Rick are just selling their interest to another partner. Now the next rule is whether 50% of the interest of the partnership is sold during one year. Tim sold 20% and then Rick sold 25%, which is 45%. 45% is less than 50%. Partnership will not be terminated.

[Resacups]

It would terminate on July 7, if and only if it results in 50% or more the partnership being sold through the two sales, but since the two sales only result in 45%, the Wiley answer is correct.

BEC: 01/09/12 PASSED
AUD: 05/29/12 PASSED
REG: 07/19/12 PASSED
FAR: 11/12/12 PASSED

[Author]

Replies