Partnership tax allocations may be made by agreement provided those allocations have substantial economic effect. The common thread in IRS-developed safe harbors for economic effect is the Section 704(b) capital account provisions. Section 704(b) capital is also the basis for determining Section 704(c) allocations of built-in gains and losses of contributed property. This course provides an in-depth analysis of how the capital account provisions apply to different transactions and illustrates how the capital accounts can be used to track allocations.