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instant case, the statute currently requires that the partners’
distributive shares be determined in accordance with the
partners’ interests in the partnership. We note that the
regulations promulgated under current section 704(b) provide that
among the factors to be considered is the partners’ interests in
the economic profits and losses of the partnership. Sec. 1.704-
1(b)(3)(ii)(b), Income Tax Regs.17
B. Partners’ Interests in the Partnership
All partners’ interests in the partnership are presumed to
be equal. Sec. 1.704-1(b)(3)(i), Income Tax Regs. This
presumption may be rebutted upon the establishment of facts and
circumstances that the partners’ interests in the partnership are
otherwise. Id. A “partner’s interest in the partnership” is
defined as the “manner in which the partners have agreed to share
the economic benefit or burden (if any) corresponding to the
income, gain, loss, deduction, or credit (or item thereof) that
17The final regulations promulgated under sec. 704(b) were
filed on Dec. 24, 1985, and published on Dec. 31, 1985. T.D.
8065, 1986-1 C.B. 254. The final regulations are effective
generally for partnership taxable years beginning after Dec. 31,
1975. For partnership taxable years beginning after Dec. 31,
1975, but before May 1, 1986 (or before Jan. 1, 1987, with
respect to special allocations of nonrecourse debt), however, a
special allocation that does not satisfy the requirements
nevertheless will be respected for purposes of the final
regulations if the allocation has substantial economic effect as
interpreted under the relevant caselaw and the legislative
history of the Tax Reform Act of 1976, Pub. L. 94-455, 90 Stat.
1520. Sec. 1.704-1(b)(1)(ii), Income Tax Regs.; see also Elrod
v. Commissioner, 87 T.C. 1046, 1086 n.23 (1986); Hogan v.
Commissioner, T.C. Memo. 1990-295 n.8.
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