Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 22

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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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