PARTNERSHIPS, TAX SHELTERS AND THE TAX REFORM ACT OF 1976

• Published in: The Tax lawyer Vol. 31; no. 3; pp. 755 - 780
• Main Authors: Kalish, Arthur, Rosow, Stuart L.
• Format: Journal Article
• Language: English
• Published: Washington Section of Taxation, American Bar Association 01-04-1978; American Bar Association
• Subjects: Collaboration; Fees; Income distribution; Income shares; Income taxes; Internal Revenue Code; Itemized deductions; Partners; Partnerships; Share distribution of income; Tax allocation; Tax court decisions; Tax payments; Tax reform; Tax Reform Act 1976-US; Tax shelters; Taxation; Taxes; Taxpaying
• ISSN: 0040-005X; 2329-6089

In enacting subchapter K of subtitle A, chapter 1 of the 1954 Internal Revenue Code, Congress provided a statutory treatment of the tax consequences of doing business in partnership form. Some statutory changes were made in the Tax Reform Act of 1976. The 1976 Act amendments have provided helpful clarification of partnership tax problems. But taxpayers and tax shelter promoters should exercise more restraint and avoid overreaching. Section 707(a) provides that if a partner engages in a transaction with a partnership other than in his capacity as a partner, the tax consequences are determined by treating the transaction as occurring between the partnership and an outsider. Subchapter K is intended to provide a flexible mechanism by which members of a partnership can share in the results of their collective enterprise according to their partnership agreement and be taxed accordingly.