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5 things to know about partnership allocations number one partnership allocations determine how the partnership items such as income gain loss deduction and credits are allocated to the partners in the partnership number two partners share in the partnership is reported on schedule K1 and issue to the partners for them to report on their Income Tax Return number three section 704a is the allocation per partnership agreement and it provides the partnership enormous flexibility in Partnership allocations number four if the allocations per section 704a lacks substantial economic effect then the IRS reallocates the partnership tax allocations in ance with the partners interest in the partnership number five there are two acceptable methods for testing the viability of a partnership Stacks allocation under IRC section 704 number one by showing that the allocation is in ance with the partners interest in the partnership number two by showing that the allocation has substantial economic effec
