Publication Date
2009
Abstract
This Article presents a theory of partnership taxation. To provide context for the presentation,the Article examines the history and status of partnerships.That examination reveals humans have a natural tendency to form partnerships and partnerships create a significant challenge for lawmakers. The challenge is determining whether partnerships are entities separate from their members or aggregates of the members. After decades of debate and consideration,many lawmakers and commentators now view partnerships as entities. Tax law has not, however, adopted that view. Partnershipsare subject to an aggregate tax regime that contains entity components. Economic theory justifies tax law deviating from the legal view of partnerships. People join together as partners to increase their collective welfare and use partnership law to apportion economic income to reduce agency costs. Aggregate taxation is uniquely suited to recognize the apportionment of economic items and to tax that apportionment accurately. That accuracy helps foster economic efficiency. To ensure efficient and accurate tax laws, lawmakers should include components in partnership tax law only as needed to guarantee effective tax administration. This Article thus proposes the aggregate-plus theory of partnership taxation, recommending that lawmakers adopt the aggregate concept for all partnership tax laws and add entity components only as needed to facilitate tax administration. It also demonstrates the theory's utility by applying it to existing and proposed rules.
Recommended Citation
Borden, Bradley T.
(2009)
"Aggregate-Plus Theory of Partnership Taxation,"
Georgia Law Review: Vol. 43:
No.
3, Article 3.
Available at:
https://digitalcommons.law.uga.edu/glr/vol43/iss3/3