USA Sale of Partnership interest

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Hello,

Can someone give me advice on whether or not I'm recording the sale of a partnership interest correctly? I am looking at an LLC with two partners. Their capital account balances and basis are equal at 50k. Partner A is selling his interest to Partner B for 200k. They want to close the books at 12/31/12 so I think I need to make an entry zero Partner A's capital account balance and set up a note payable. What is the other side of the entry? I've read that I should reduce Partner B's capital account by the difference but then he would have a large negative capital account. Does this look correct? Here's what I think

Dr. Partner A Capital Account $50,000
Dr. Partner B Capital Account $150,000
Cr. Note Payable to Partner A $200,000

Does anyone know the tax implications of the Note Payable? It's going to be paid off in 2 installments. Would this be a capital gain to Partner A for $150,000? This looks like a non-deductible non-taxable event for Partner B and the LLC.

Also, the LLC is set up in CA but the remaining partner will be a single-member LLC and lives in MA. What's the easiest way to move the LLC to MA?

Thank you very much for your help!
 

kirby

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Remaining partner now has a negative capital. So entries not correct. Before sale total of partner capital = 100k but selling partner getting 200k so partnership is worth 400k. You need to book a goodwill asset.
 
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Why are you booking the note payable as a partnership debt if, as you say, Partner A is selling to Partner B, not to the LLC?
 

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