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Tax Implications of a Sale or Withdrawal from a Partnership
January 9, 2012 /
A few years ago, Fred, a client of mine, came into my office telling me he decided to open his own business and he intended to withdraw as general manager/part owner from the partnership of his current business.
"I am burnt out dealing with those three other guys, so we settled on $100,000 payoff. I’m using the money to open a new business and would like you to handle the books and taxes," he said.
I told him the withdrawal could be a taxable event. But he stated that was how much he put into the business to begin with and that he was just cashing out–so how could that be taxable?
I sure hate to disappoint people, but facts are facts and so are tax code rules.
Written By Bonnie Lee
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Posted in: Funding and Building your Business