when you own a partnership interest you are taxed on your share of its earnings whether you get the income in cash or not. The same is true for an S-Corportion. They are passthrough entities meaning their income is passed through to the owners to include on their tax return regardless of whether they got any cash out. Since it is passive income, it's taxed in 2023. if it had been a passive loss, special rules come into play which may bar the deduction until either there's income or you dispose of your interest in a fully taxable transaction. Any cash distributed to you from the partnership is generally tax-free since you likely paid tax on it or its a return of your investment.
