New Year Insights: Partnership Agreements and Allocations

The allocations that partners establish in their partnership agreement determine each partner's distributive share. A partner’s distributive share is that fraction of a partnership's items of income, gain, loss, deduction, and credit that the partnership agreement allocates to that partner in a particular taxable year. The partnership agreement is the starting point for the Internal Revenue Code's analysis of the partners' distributive shares. Totally separate from a partner's distributive share is the partnership's actual distributions to a partner.

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