yes we have an agreed buy out , After i retired , income tax payments have been deducted from my capitol account as before , and the business has paid the income tax bill, as before i retired , but now the tax paid by the business for while i was working has also been deducted from the buy out figure
Ross, thank you for your reply.It would be normal to make adjustment to capital account for tax paid on profits, if paid out of the business account and not by partners out of their personal funds.What you have to establish is - was amount agreed at the time of buy out before any impending tax on the profits while you were still a partner, or- did the amount include provision for tax payment to be made after buy out but relating to pre buyout profits.You have to satify that the tax to be paid has not been double counted. Ask your ex partner of the calculations in arriving at buy out priceI hope this is helpful and answers your question.
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