Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 24

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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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