Partnership Loss Allocation

[kpr17@onetel.com]

Husband & wife in partnership with no partnership agreement make a loss in the first period in 2004/05. Husband has other earnings in 2004/05, wife has not worked for 6-7 years. They want the 2004/05 loss to be allocated 100% to husband but can the revenue challenge this? Also, should the percentage profit share in the accounts reflect that in the tax comp?

[King_Maker]

Partners can change the profit (and loss)sharing ratios whenever they wish.

In the IR's opinion, they consider they can challenge the allocation under the Settlements legislation - and they often do for husband and wife partnerships.

However, if it's the husband who does most of the work, that will not get the IR very far in this instance?

It might be prudent to draw up a Memorandum to recite what the parties have agreed. It is not as good as a Partnership Agreement from commencement, but it may assist in countering an IR challenge.