1. (1) A partner who engages in a transaction with a partnership other than in his capacity as a partner shall be treated as if he were not a member of the partnership with respect to such transaction. In all cases the substance of the transaction will govern and not its form. The relationship between a partner not acting in his capacity as a partner and the partnership may include, but is not limited to that of creditor-debtor, vendor-vendee and employee-employer.

2. (2) To the extent determined without regard to the income of the partnership, payments to a partner for services or for the use of capital shall be considered as made to one who is not a member of the partnership. Such guaranteed payments to partners shall be treated as a deductible business expense in the computation of the partnership net income.

   1. 2. Gain or loss will be recognized by a partner on a distribution of property from a partnership to the extent provided in §40-18-8.

   (3)(a) Gain or loss will be recognized by a partner on a contribution of property to a partnership in exchange for an interest in the partnership to the extent provided in §40-18-8.

   (b)1. Gain or loss will be recognized by a partnership on a distribution of property to a partner to the extent provided in §40-18-8.

Author: Ecta Spicer, Roy Wiggins, John H. Burgess

Statutory Authority: Code of Ala. 1975, §40-18-24.

History: Adopted June 17, 1988; filed July 27, 1988.