Partner Taxed on Full Distributive Share

In one recent case, a partner’s distributive share of partnership income was $479,743, but he reported only $75,000. He argued that he was required to use the rest to pay partnership expenses so that the firm didn’t fail. The Tax Court said the full amount was taxable to him. His use of his share to pay expenses was a contribution to capital and that he could deduct his share of partnership expenses.