Which requirement must be satisfied in order to specially allocate partnership income or losses to partners?
A)Special allocations must have economic effect.
B)At least one partner must agree to the special allocations.
C)Special allocations must be insignificant.
D)Special allocations must reduce the combined tax liability of all the partners.

Question

Quizplus · Accepted Answer

In order for special allocations of income or losses to be valid for tax purposes, they must have economic effect, meaning they must reflect the actual economic arrangement of the partnership. This requirement ensures that the tax consequences of the special allocation reflect the true economic arrangement between the partners. Choices B, C, and D are incorrect because they do not reflect the actual tax requirements for special allocations.

Which Requirement Must Be Satisfied in Order to Specially Allocate