Income that is flowed through a partnership into the hands of the partners will retain its tax characteristics (e.g., the partnership's capital gains will be passed to the partners as capital gains).

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This is known as pass-through taxation and is a characteristic of partnerships where the income and tax liabilities are divided among the partners based on their ownership percentage. The partnership itself does not pay taxes on its profits or losses, and instead, the partners report their share of the partnership's income or loss on their individual tax returns. This allows the income to retain its tax characteristics and avoids double taxation.

Income That Is Flowed Through a Partnership into the Hands