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The “aggregate theory” and the “entity theory” are two
theories regarding the basic nature of a partnership. The
aggregate theory considers a partnership to be no more than an
aggregation of the individual partners. Whereas, the entity
theory characterizes a partnership as a separate entity distinct
from its partners. Whether the aggregate theory or the entity
theory should be applied for all purposes has not ultimately been
determined. Unger v. Commissioner, T.C. Memo. 1990-15, affd. 936
F.2d 1316 (D.C. Cir. 1991). The theory employed varies from case
to case, often depending on the issue to be decided. Id.
Under the aggregate approach, each partner has an interest
in specific partnership property. Unger v. Commissioner, 936
F.2d 1316, 1318 (D.C. Cir. 1991), affg. T.C. Memo. 1990-15. In
contrast, under the entity approach, partnership property is
attributable to the partnership only, not to the partners. Id.
The California and Nevada partnership law deals with
partnerships as aggregates for certain purposes and as entities
for others. The definition of a partnership as an “association
of two or more persons” to carry on as co-owners a business for
profit suggests that a partnership is an aggregate of its
members. However, the fact that specific partnership property is
a distinct category of property indicates the entity approach
would apply to partnership assets. See Stilgenbaur v. United
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