Legal Definitions - distributive share

The term distributive share refers to a specific portion of assets, income, or liabilities allocated to an individual or entity from a larger pool, typically in the context of an estate or a business partnership.

It can apply in several distinct situations:

• In Estate Administration: This is the portion of an inheritance that an heir or beneficiary receives from the legal distribution of a deceased person's estate. This share is determined either by a will or by state laws if there is no will.

• In Partnership Taxation: This refers to a partner's agreed-upon portion of a partnership's income, gains, losses, deductions, or credits for a given tax period. Partnerships are often "pass-through" entities, meaning the business itself doesn't pay income tax; instead, each partner reports their distributive share on their personal tax return.

• In Partnership Dissolution: When a business partnership ends, its assets are sold, debts are paid, and any remaining value (or outstanding liabilities) is divided among the partners according to their partnership agreement. The portion of these remaining assets or liabilities allocated to each partner is their distributive share.

Examples:

• Imagine a scenario where a beloved aunt passes away without a will, leaving behind an estate valued at $600,000. According to state law, her two nieces and one nephew are her closest living relatives and are entitled to inherit equally. Each niece and the nephew would receive a distributive share of $200,000 from the estate.

• Consider "Green Thumb Landscaping," a partnership owned by two friends, Sarah and Mark. Their partnership agreement states that Sarah receives 70% of the profits and losses, and Mark receives 30%. In a successful year, the business generates $150,000 in taxable income. Sarah's distributive share would be $105,000, and Mark's would be $45,000. They would each report these amounts on their individual tax returns, regardless of how much cash they actually withdrew from the business.

• Suppose three partners decide to close down their artisanal coffee shop, "The Daily Grind." After selling all equipment, inventory, and paying off all outstanding debts, there is $90,000 remaining in cash. Their partnership agreement specifies that Partner A receives 40% of residual assets, Partner B receives 35%, and Partner C receives 25%. Partner A's distributive share would be $36,000, Partner B's would be $31,500, and Partner C's would be $22,500 from the dissolved partnership.