Partnership calculation - capital percentage or profits percentage

[Belgarath]

Don't think I've ever seen this come up.

The K-1 shows different percentages in Part II, Box J - one percentage for profit and loss, and 1 percentage for capital. Trying to determine which to use!

1.404(e)1A(f)(1) refers you to IRC 702(a)(8) and 704. And 704 basically refers you to the partnership agreement.

Logically, to me at least, one would use the profit percentage on the Schedule K, rather than the capital percentage. Any thoughts on this?

[Bird]

If you are allocating costs like employer contributions, then you probably do it by profit percentage. But I've had weird arrangements where they split the costs one way and the profits another...you probably have to ask, and then use your judgment.

[Lou S.]

If determining HCE/KEY use the higher percentage; if allocating costs, ask the accountant.