@Toksica...Form 1065 is essentially an informational return. Because partnerships are a "pass-through" entity, meaning that all income and/or loss for a given tax year passes through the partnership to the partners based on their respective ownership in the partnership, the partnership does not pay any income tax. In other words, there is no double taxation because the partnership should not be paying any federal tax. Rather it is the individual partners that are responsible for paying their respective share of any income tax due on the income received.
You are correct when you indicate that the partners will pay tax on their distributive share of income, and they will also, if applicable, receive their distributive share of any partnership loss. Shareholders of publicly traded corporations do on some level confront the double taxation issue, because corporations will pay tax on their earnings, and then when, or if, those earnings are distributed to shareholders in the form of dividends, then the shareholders pay tax on those dividends. Therefore, because the corporate earnings are taxed, and the dividends are also taxed (and the dividends come from the earnings), there is the view that corporations and shareholders contend with the double taxation issue.
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