Retiring partner; calculations

Retiring partner; calculations

Didn't find your answer?

I have a client who is retiring from a continuing partnership. His final basis period is 16 months, and during that period his profit-sharing ratio has changed twice. How do I deal with these changes? I cannot find a single example in the text-books!
RT

Replies (1)

Please login or register to join the discussion.

avatar
By ACDWebb
06th Jan 2008 15:42

Presumably his basis period is made up of
a partnership accounts year and a part of the following partnership accounts year and not an extended period with a change of account date.

Apportion the tax adjusted profits for each period on a proportionate daily basis by reference to PSR's for each period.

For example
ye 30/4
A Retires 31/10/06
Ratios A:B:C 3:2:1 - 31/3/06
2:2:2 - 31/7/06
1:3:2 - 31/10/06
Tax profits 50k ye 30/4/06 - 60k 30/4/07

I would have thought splits would be as follows
to 31/3/06 £50000 x 335/365 x 3/6 = £22,495
to 30/4/06 £50000 x 30/365 x 2/6 = £1,370
Total 30/4/06 £24,315

to 31/7/06 £60000 x 92/365 x 2/6 = £5,041
to 31/10/06 £60000 x 92/365 x 1/6 = £2,521
Total pe 31/10/06 £7,562

Thanks (0)