On the dissolution of a partnership firm, if the solvent partners have equal capital balances, in what ratio will they bear the insolvent partner’s capital deficiency?

Correct answer: In equal proportions

Under the Garner v. Murray rule, unless the partnership agreement provides otherwise, the insolvent partner’s capital deficiency is borne by the solvent partners in their capital ratio. Since their capital balances are equal, the capital ratio is equal and the deficiency is shared equally. Exam tip: determine the solvent partners’ capital ratio first, then allocate the deficiency in that ratio.