G & S Investments v. Belman (Ariz. 1984)
FACTS
Case of the drug-using, sexually harassing partner who died.
ISSUE
Issue is the interpretation of the buy-out formula.
Note that a capital account is determined in an entirely different way from the fair
market value of the partnership interest. In a dissolution, the court will rely on the
former, not the latter.
ANALYSIS
Defendant had a negative capital account because there was a write-off for
depreciation (a loss), which is very common in real estate.
If a partner is expelled, he is penalized because he has a negative capital account. So,
should always ask when drafting agreement whether buy-out agreement has a rational
result.
FACTS
Case of the drug-using, sexually harassing partner who died.
ISSUE
Issue is the interpretation of the buy-out formula.
Note that a capital account is determined in an entirely different way from the fair
market value of the partnership interest. In a dissolution, the court will rely on the
former, not the latter.
ANALYSIS
Defendant had a negative capital account because there was a write-off for
depreciation (a loss), which is very common in real estate.
If a partner is expelled, he is penalized because he has a negative capital account. So,
should always ask when drafting agreement whether buy-out agreement has a rational
result.
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