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effect. The estate recognizes that, if a partnership
agreement is silent as to how partnership income should be
allocated, as is the case here, then income is allocated
according to the partners' interests in the partnership
and, in that event, the substantial economic effect test
of section 704(b)(2) has no application. Nevertheless,
the estate is concerned by the statement in Darwin's cross-
motion for summary judgment that "no provision exists in
the partnership agreement for the restoration of a deficit
in a partners [sic] capital account." Because, in the
estate's view, the Court could find that a 50-50 allocation
does not have substantial economic effect, the estate
includes a discussion of the substantial economic effect
of such an allocation.
Third, contrary to respondent's position, the estate
argues that a "50-50 income allocation is consistent with
the requirements of the Internal Revenue Code under all of
the undisputed facts and circumstances of this case." In
support of this argument, the estate notes that no
distributions of income were made by the partnership during
any of the years in issue and asserts that the income
reported by the partnership during those years did not
inure to James' benefit. In this connection, the estate
argues that the income reported by the partnership did not
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