lo[at]ilo-infosystems.us (iloadmin) wrote:

- quote -

Clear and simple tax law, isn't that an oxymoron, like
military intelligence? Sorry couldn't resist.

This regulation is 70+ pages when I print it from my tax
service. I am not sure that can be boiled down to a simple
and concise explanation without omitting much of the
pertinent information.

The regulation explains IRC Section 704(b). So 704(b) is
probably as summarized as you can get:

(b) Determination Of Distributive Share
A partner's distributive share of income, gain, loss,
deduction, or credit (or item thereof) shall be determined
in accordance with the partner's interest in the partnership
(determined by taking into account all facts and
circumstances), if--

(1) the partnership agreement does not provide as to the
partner's distributive share of income, gain, loss,
deduction, or credit (or item thereof), or

(2) the allocation to a partner under the agreement of
income, gain, loss, deduction, or credit (or item thereof)
does not have substantial economic effect.

--- end quoted text

The idea is to try to prevent the partnership agreement from
shifting the tax burden without shifting the economic
benefits to match.

Drew Edmundson, CPA (NC)

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I am a newbie in legal terminology as it relates to Treasury
Regulations. Can someone give a clear and simple
explanation of Treasury Regulation 1.704-1(b) and how it
works in a operating agreement? I would greatly appreciate
it.

Thanks in advance,
iloadmin

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