Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 23




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               within the meaning of the statute.  The overriding                     
               principal is sometimes referred to as the doctrine of                  
               “substance over form,” or is alternatively described as                
               the “economic substance” test.  See, e.g., 1A. Willis,                 
               Partnership Taxation, sec. 25.11, pp. 316-319 (1976).                  
               [Boynton v. Commissioner, supra at 1158-1159.]                         
          Our decision in Boynton v. Commissioner, supra, dealt with                  
          section 704(b) as in effect in 1974.  As in effect at that time,            
          and as interpreted in Boynton, section 704(b) generally provided            
          that if the partnership agreement did not provide as to the                 
          partners’ distributive shares, or the principal purpose of any              
          provision of the partnership agreement with respect to the                  
          partners’ distributive share of the item was avoidance or evasion           
          of tax described in that subtitle, then the partners’                       
          distributive shares were determined with reference to each                  
          partner’s agreed-upon share of the economic profits and losses,             
          not the basis upon which the partners might agree to report                 
          income or claim losses on their individual returns.  Boynton v.             
          Commissioner, supra at 1157 n.12, 1159.  Section 704(b) was                 
          subsequently amended for taxable years beginning after December             
          31, 1975, and now provides that if the partnership agreement does           
          not provide as to the partners’ distributive shares, or the                 
          allocations to the partners under the partnership agreement lack            
          substantial economic effect, then the partners’ distributive                
          shares will be determined in accordance with the partners’                  
          interests in the partnership.  Sec. 704(b); Tax Reform Act of               
          1976, Pub. L. 94-455, sec. 213(d), 90 Stat. 1548.  Thus, in the             





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