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B. What was Yung’s distributive share?
A distributive share is the portion of a partnership’s
income and losses which flows through to an individual partner.
Normally, each partner’s distributive share is set out in a
partnership agreement. Sec. 704(a). When a partnership
agreement is silent, each partner’s distributive share is
determined by his interest in the partnership. Sec. 704(b)(1).
A partner’s interest is determined by looking at “all facts and
circumstances relating to the economic arrangement of the
partners.” Sec. 1.704-1(b)(3)(i), Income Tax Regs. There is a
presumption that each partner has a per capita share in the
partnership, but this may be rebutted by facts and circumstances
showing a different arrangement. Id.
Based on the testimony of both Lok and Yung, and the profit
and loss statement for 1998, we find that Yung had a one-third
interest in the partnership at the end of 1998. However, it is
somewhat unclear whether he held a one-third interest for the
entire tax year, or just at the end. Yung testified that he
contributed $10,000 during 1998, but then in the answering brief
accepted respondent’s statement that he didn’t make any capital
contributions after 1995. A partner’s distributive share must
take into account the various partnership interests throughout
the year as well as the length of time each interest was held,
sec. 706(d), but we do not find Yung’s assertion that he made an
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