ACCOUNTING FOR PAYMENTS TO THE ESTATE OF A DECREASED PARTNER.

The article presents a case study pertaining to accounting for payments to the estate of a deceased business partner. The accounting dilemma has two phases. It involves the determination of whether the amount paid should be treated as a corporate cost or a distribution of profit. The other issue involves the determination of corporate taxable income. The case study focuses on a company which had the provision for giving the estate of a deceased partner compensation for the share of good-will profits. Analysts say that these payments may be termed as a distribution of profits, constituting income to the estate of the deceased partner. They warn though that there is no concrete legislation pertaining to business partnerships.