This document defines key terms related to partnership liquidation including dissolution, winding up, termination, liquidation, realization, and defines a partner's interest, capital account, free interest, and restricted interest. It also discusses the process of marshaling assets and the definitions of insolvent partner, solvent partner, capital deficiency, and deficient partner in the context of partnership liquidation.
This document defines key terms related to partnership liquidation including dissolution, winding up, termination, liquidation, realization, and defines a partner's interest, capital account, free interest, and restricted interest. It also discusses the process of marshaling assets and the definitions of insolvent partner, solvent partner, capital deficiency, and deficient partner in the context of partnership liquidation.
Original Description:
Definition of terms on Chapter 6: Partnership Liquidation (Lump-Sum)
This document defines key terms related to partnership liquidation including dissolution, winding up, termination, liquidation, realization, and defines a partner's interest, capital account, free interest, and restricted interest. It also discusses the process of marshaling assets and the definitions of insolvent partner, solvent partner, capital deficiency, and deficient partner in the context of partnership liquidation.
This document defines key terms related to partnership liquidation including dissolution, winding up, termination, liquidation, realization, and defines a partner's interest, capital account, free interest, and restricted interest. It also discusses the process of marshaling assets and the definitions of insolvent partner, solvent partner, capital deficiency, and deficient partner in the context of partnership liquidation.
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Chapter 6: Partnership Liquidation (Lump-Sum) Partner’s Interest – the sum of a partner’s
capital, loan balance and advances to the
Dissolution – the termination of a partnership partnership as a going concern; it is the termination of the life of partnership. Marshaling of Assets – involves the order of creditor’ rights against the partnership’s assets Winding Up – the process of settling the and the personal assets of the individual business or partnership affairs; it is partners. synonymous to liquidation Insolvent Partner – a partner whose personal Termination – the point in time when all assets are less than his personal liabilities partnership affairs are ended Solvent Partner – a partner whose personal Liquidation – the interval of time between assets are more than his personal liabilities dissolution and termination of partnership affairs; it is also the process of winding up a Free Interest – a partner’s capital interest that business which normally consists of is available for cash payment conversion of assets into cash, payment of liabilities and distribution of remaining cash Restricted Interest – a portion of a partner’s among partners. capital account balance that is restricted for possible losses on liquidation. It is not, Realization – the process of converting non- therefore, available for cash payment. cash assets into cash
Gain on Realization – the excess of the selling
price over the cost or book value of the assets disposed or sold through realization
Loss on Realization – the excess of the cost or
book value over the selling price of the assets disposed or sold through realization
Capital Deficiency – the excess of a partner’s
share on losses over his capital
Deficient Partner – a partner with a debit
balance in his capital account after receiving his share on the loss of realization
Right of offset – the legal right to apply part
of all the amount owing to a partner on a loan balance against deficiency in his capital account resulting from losses in the process of liquidation