Chapter 17 - Partnership Admissions and Retirements

Question 1

Intro

Answer 1

If there’s a partner admission or retirement, the profit sharing ration has to change. Follow the rules of adjust profit, allocate them and then use the partnership changes rules

Question 2

Partner Admissions

Answer 2

Split the accounting period at the date of admission. Current partners are assessed as normal under the current year basis, the joining partner is taxed under the commencement rules ie opening year rules

Question 3

Partners Retiring

Answer 3

Three basic steps when a partner retires.

1) Adjust accounting profit
2) Allocate using the change in profit ratio (splitting the period at the date of retirement)
3) Tax profits accordingly: continuing partners under CYB, retiring partner using the cessation rules where overlap profits reduce the assessment.