A partnership agreement provides that,at sale,cash proceeds are distributed first to Mr.Smith in an amount equal to his original investment less any cash distributions previously received,then split 50-50 between Mr.Smith and Ms.Jones.Assume that the cash flows from sale are $1 million.How much would Mr.Smith receive if his initial investment was $400,000 and he previously received $25,000 in distributions?

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Mr. Smith first receives his initial investment of $400,000 minus the $25,000 in distributions he already received, which equals $375,000. The remaining $625,000 ($1,000,000 - $375,000) is then split 50-50 between Mr. Smith and Ms. Jones, giving Mr. Smith an additional $312,500. Therefore, Mr. Smith receives a total of $687,500 ($375,000 + $312,500).

A Partnership Agreement Provides That,at Sale,cash Proceeds Are Distributed First