The Arcadia Investment Partnership, always a creative bunch,

identifies two of its partners who are in substantially different tax positions.

To tl;ie low$-$bracket partner, who otherwise would be entitled to $20\%$ of all items

of income, gain and loss, it allocates $40\%$ of its taxable interest income for a

period of three years, at which point the allocation falls to $0\%$ for three years

and then reverts to $20\%$ thereafter. To the high$-$bracket partner, also

ordinarily entitled to $20\%$ of all items, it allocates no taxable interest income

for a period of three years, then $40\%$ for three years, and then $20\%$ thereafter.

There are no other changes to the partnership agreement, other than

provisions designed to prevent either partner from liquidating any portion of

that partner's interest during the period that these special allocations are in

effect. Assuming the allocations have economic effect, is that effect

substantial?

a$)$ No$,$ because they do not satisfy the shifting test

b$)$ No$,$ because they do not satisfy the overall$-$tax$-$effect test

c$)$ No$,$ because they do not satisfy the transitory test

d$)$ Yes, because they satisfy all applicable tests