A payment to a retiring general partner for his or her share of goodwill of a partnership in which capital is not a material income-producing factor is classified as a § 736(a) income payment and results in ordinary income to the retiring partner and a current deduction to the partnership, if the goodwill payment is not provided for in the partnership agreement.

Question

Quizplus · Accepted Answer

A payment to a retiring general partner for their share of goodwill in a partnership that does not consider capital as a significant source of income is classified as a § 736(a) income payment. The retiring partner's ordinary income is affected, as well as the partnership's current deduction, unless the goodwill payment is provided for in the partnership agreement.

A Payment to a Retiring General Partner for His or Her