Partnership ceased and debit capital account
Partnership has ceased trading and one partner has drawn more than his share of profits, leaving him with a debit balance on his capital account which won;t get carried forward.
What is the usual treatment for tax purposes?
Off the top of my head it would seem equitable, as it's the final year of trading, to increase his share of profits to equate with the drawings so that he pays more income tax. Someone suggested it's his capital account so it's a capital gain and covered by the the annual allowance. So no tax to pay on it. Seems like a good wheeze.
Stumped. What's the real answer?
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