Final answer:
The best-suited disability buy-sell agreement for ABC Partnership is a Cross-Purchase Agreement, where each partner agrees to purchase the shares of the other partner in case of disability. This ensures continuity and control within the partnership.
Step-by-step explanation:
The disability buy-sell agreement that is best suited for ABC Partnership is a Cross-Purchase Agreement. In a Cross-Purchase Agreement, each partner agrees to purchase the shares or ownership interest of the other partner in the event of a disability. This type of agreement is ideal for partnerships with a limited number of partners, as it allows the remaining partners to directly purchase the disabled partner's share, ensuring continuity and control.
For example, if there are three partners in ABC Partnership and one partner becomes disabled, the remaining two partners will buy out the disabled partner's share according to the predetermined terms of the agreement.
Key benefits of a Cross-Purchase Agreement include the ability to maintain control within the partnership and the availability of a step-up in basis for the purchasing partners, which can provide tax advantages.