There is a 50/50 partnership with Jim and Mary. Partner, Mary, decided to walk away from the business in September 2017. She didn't ask for any money. Someone else, Kevin, said they would start in the partnership on November 1, 2017. So now Kevin is the new 50% partner.

Looking at the client file, you see that Mary owned 50% of the partnership. At the end of the last year, she had owner's capital of $253. The company has a lossfor 2017 of about $6,000.

Mary was given 50% ownership of the business about five years ago and paid in no money for that share just like the new arrangement with Kevin.

The 2017 tax return is on extension and is being worked on to be submitted for September 15th, 2018.

As their tax preparer, what are the tax issues and how does the partnership need show the change in ownership? How is this situation handled?