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Tax Implications of a Sale or Withdrawal from a Partnership

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

Full Story: http://smallbusiness.foxbusiness.com/legal-hr/2012/01/06/tax-implications-sale-or-withdrawal-from-partnership/

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