CHANGE IN CAPITAL STRUCTURE BY WITHDRAWAL, RETIREMENT, DEATH OR

INCAPACITY OF A PARTNER

Interest of retiring partner may be:

1. Sold to a new partner (outsider)
2. Sold to continuing partner
3. Sold to the partnership

SALE OF INTEREST TO A NEW PARTNER

- recorded in the same manner as the admission of a new partner by purchase
- recognizes ONLY TRANSFER OF CAPITAL INTERST from retiring partner to the new partner
- ANY GAIN/LOSS from sale is a PERSONAL GAIN/LOSS of the RETIRING PARTNER

SALE OF INTEREST TO CONTINUING PARTNER

- recorded in the same manner of the SALE OF INTEREST TO NEW PARTNER
- recognizes only transfer of capital interest from the retiring partner to the retiring
partner/s