A recent Tax Court decision presents an opportunity to review the function of the partnership in the income tax field. A partnership sold its assets under circumstances where it could have elected to treat the transaction as an installment sale under section 44(b) of the Internal Revenue Code. However, on the partnership return, the capital gain from the sale was reported on the completed 'transaction basis. The partner on his *return reported his share of the partnership capital gain on the installment basis. The tax court held that the partner must report the same distributive share of the gain as reported in the partnership return and could not elect to report his distributive share of the gain under the installment method. An understanding of the role of the partnership and partnership tax return in income tax laws is essential to the proper analysis of this case. Many of the inconsistencies and areas of dispute in the present tax law stem from the fundamental difference in the conceptual nature of a partnership. On the one hand the partnership may be regarded as an aggregate of the partners engaged in a joint enterprise (similar to a tenancy in common); on the other hand it may be regarded as a business entity separate and apart from its constituent members (similar to a corporation).
John P. Pfann,
Income Tax-Partnerships — Distributive Share of Capital Gains — In What Respect is the Partnership Tax Return More Than an Information Return?,
33 Neb. L. Rev. 74
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