Partnership liquidating distribution worksheet
Computing target allocations requires two separate calculations.
However, because these allocations generally are in line with the partners' interests in the partnership, they may satisfy the economic-equivalency test.
Luckily, the IRS added an alternative test as a safe harbor.
An allocation will still be considered to have economic effect if, instead of the deficit restoration requirement, the partnership provides for a qualified income offset (QIO).
The IRS hasn't ruled on whether it will respect the targeted allocations, so it is unknown whether these allocations will stand up under audit.
As more partnerships use these allocations, the hope is that the IRS will consider them industry standard and not challenge them.