Chapter 16, Problem 16.6Q

To determine

Deficit in partner’s capital account: may occur if its credit balance it too low to absorb losses. Such deficits may be rectified by either, the partner invests cash or other assets or the capital deficit is distributed to the other partners in loss sharing ratio. The approach used depends on the solvency of the partner with the capital deficit. If the partner is solvent capital deficit must be rectified by additional investment and if the partner is personally insolvent, section 807 of UPA 1997 requires the remaining partners to absorb the insolvent partner’s deficit by allocating their capital accounts in their resulting loss sharing ratio.

how is deficit in partner’s capital account is eliminated if he or she is personally insolvent.