June 6, 2019 3:29 AM
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You are taxable on a partnership distribution only to the extent that a distribution exceeds your basis in the partnership. Say you originally contributed $10,000 to the partnership at inception ($10,000 basis), plus earnings increase in year one due to earnings inside the partnership of $1,000 (your portion)--now your basis. A $600 distribution will reduce your basis from $11,000 to $10,400 and the distribution is not taxable. If you originally contributed $500 (your basis) and then the partnership made a distribution to you of $600, $100 would be taxable to you in this second fact pattern.