Question

individual c is admitted with a 30% interest to the ab partnership in exchange for $50,000 cash paid to partners a and b. why might c receive a capital credit for less that the $50,000 cash payment?

Answer 1

Partner C might receive a capital credit for less than the $50,000 cash payment in exchange for a 30% interest to the AB partnership due to the allocation of profits and losses based on capital investment and the treatment of goodwill or intangible value.

Step-by-step explanation:

Individual C might receive a capital credit for less than the $50,000 cash payment in exchange for a 30% interest to the AB partnership due to various reasons.

One possible reason is that the partnership agreement may allocate profits and losses based on the capital invested by each partner. If partners A and B have contributed a higher amount of capital than partner C, then partner C may receive a lower capital credit.

Another reason could be that partner C's contribution may be considered as goodwill or intangible value in the partnership, which may not be taken into account for calculating the capital credit.