A partnership's allocations of income and deductions to the partners are required to be proportionate to the partners' percentage ownership of partnership capital in order to meet the substantial economic effect tests.

Question

Quizplus · Accepted Answer

The substantial economic effect tests require that allocations have substantial economic effect, which means they must be consistent with the underlying economic arrangement of the partners, not necessarily proportionate to capital ownership.

A Partnership's Allocations of Income and Deductions to the Partners