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sales must be allocated in accordance with the partners’
interests in BBP.
We note that the estate relies on the following language in
Boynton v. Commissioner, 72 T.C. 1147 (1979), affd. 649 F.2d 1168
(5th Cir. 1981), to support its position and define the term
“distributive share”:
However, the power of the partners to fix their overall
“distributive” shares is subject to another and more
sweeping limitation, namely, that the purported
allocations of income and losses nominally made in the
partnership agreement must be bona fide in the sense
that they are genuinely in accord with the actual
division of profits and losses inter sese which the
partners have in fact agreed upon among themselves.
Thus, if provisions of the partnership agreement itself
effectively spell out how the profits are required to
be divided and how the losses are required to be borne,
the “distributive” shares of the partners will be
determined in accordance with such provisions, rather
than by an artificial label in the agreement which
characterizes as “distributive” an entirely different
allocation of profits and losses, and which has meaning
in terms of the partnership agreement only in respect
of the partners’ liability to the Internal Revenue
Service. This does not mean that the partners are
precluded from fixing their distributive shares in any
manner they choose. What it does mean is that in
construing the partnership agreement, the formula which
they select for actually dividing profits and
apportioning losses among themselves will be
determinative of their “distributive” shares, rather
than a different formula arbitrarily included in the
agreement which is to be applicable only for the
purpose of filing income tax returns, and which is to
have no legal consequences in respect of their rights
against one another. In short, where one provision of
the agreement which purports to characterize as
“distributive” a certain division of profits and losses
is contradicted by another provision which legally
fixes the rights of the partners inter sese, it is the
latter provision, rather than the former, which
establishes the “distributive” shares of the partners
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