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The third factor to consider in determining a
partner's interest in the partnership is the partner's
interest in cash-flow and other nonliquidating
distributions. Although all of the profits of the
business were reinvested in the business, James and Darwin
were reimbursed for various business expenses that they
personally incurred. However, after his eviction in 1986,
Darwin did not personally incur any business expenses
because he did not participate in the business. Thus, for
the years in issue, Darwin did not have any interest in the
cash-flow or other nonliquidating distributions of the
business.
The fourth factor to consider in determining a
partner's interest in the partnership is the partner's
right to distributions of capital upon liquidation of the
partnership. This factor requires that we determine how
the partnership would have been liquidated in each of the
years in issue. This factor is directly related to the
capital contributions of each partner. As discussed
earlier, the State court determined that James'
contributions, $1,001,568.60, substantially exceeded
Darwin's contributions, $2,320, and our review of the
State court opinions suggests that James had contributed
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