Business & farm

Final comments:

• The attached commentary from a noted authority on partnership tax summarizes my points: In general, the Regulations provide that an allocation contained in a partnership agreement is valid if it satisfies one of three tests: (1) it has “substantial economic effect”; (2) it is in accordance with the partners' interests in the partnership, as determined by reference to all the facts and circumstances; or (3) it is “deemed” to be in accordance with the partners' interests in the partnership. Although the substantial economic effect test is not entirely objective, it should generally be viewed as a safe harbor test. If an allocation does not satisfy the substantial economic effect test, it may nevertheless be valid if it is deemed to be in accordance with the partners' interests in the partnership. If an allocation does not satisfy either of these tests, the items that are the subject of the allocation will be reallocated to comport with the partners' interests in the partnership.
• "Using getting around the SEE regulations" was not the best use or words, as the DRO's and QIO are alternate tests.  
• Your example does nothing more that supports the requirement to meet the 704(b) regulations.  No such facts were provided.  The forum is a place to provide guidance for questions, some of which are way too complicated to explain and are beyond the scope of the forum.  Responses are an attempt to provide some "English commentary" for complicated situations.  
• I don't believe that I stated anything about the allocations failing.
• Bringing up Series LLCs into something like this is only mudding the water as there is far less clarity on those arrangements depending on the facts.
• SU's don't "spray words" on this forum.  Responses, as noted above, are there to help provide TT users with guidance in a very complicated tax environment.  Additionally, this is not a tax seminar forum.  For me personally, I have taught partnership tax for decades, attend high level partnership seminars which are led by noted authorities in the partnership world; Cliff Warren Senior Counsel in the passthrough group of the IRS; Eric Sloan of Gibson Dunn and former head of Deloitte passthrough group, Jenny Alexander co-managing principal of the passthrough group for Deloitte, Chuck Levun, Michael Cohen and other noted experts in the passthrough world.
• This forum doesn't need "chest thumpers" trying to out do someone else.  Most responses that deal with complex issues end with the suggestion that they seek out a tax professional who can sit down one on one and go through their specific facts, which was EXACTLY my recommendation in my last sentence.
• End of my discussion on this matter.