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>>According to his contract their is no buy in (although he did pay a small amount for the stock) and no buy out of the stock. However, it does say in the contract that he would be paid the balance of his receivables, less 10%, as compensation over a 32 month period. Is this right? Can they do it this way?
There's a very good reason why the "buyback" is set up as it is. As the corporation collects those receivables after your hubby leaves, the corp will be treating them as ordinary income. It would hardly be fair to the remaining partners to report those receivables as ordinary income and pay out to the exiting partner in a fashion that doesn't allow them an offsetting tax deduction. This is a standard way of handling buyouts with partners exiting any personal service/professional type of business, which I assume is what your husband's is.
Gregg SeaPA
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