Capital account reconciliation
A partnership consists of 4 partners with different shares. Two have 25% each, one has 30%, and one has 20%. Due to significantly declining revenues, the partnership is to be sold. Over the years, the capital accounts have grown to different levels, likely due to the different shares. The sale proceeds are to be divided and taxed according to the percentages. Do the capital accounts need to be balanced before the sale? However, there is no money left in the account. Can each partner deduct their capital account from the tax when selling? Would one partner suffer a financial disadvantage in this case? Can the partner with the highest capital account demand compensation from the other partners?
