under subpart e of part i, subchapter j of chapter 1 of the code, the grantor of a trust will be deemed to be the owner of the trust under certain circumstances, and therefore taxable on his proportionate interest in the income thereof.

in a partnership, the partners share the profits and the losses from the business. some partners may receive a salary for their labor in addition to their share of the allocation of the partnership profits. paying salaries to partners in a partnership can help to compensate the partner for his active management participation in the business, especially when the business is operating at a loss or making limited profits. as funding sage describes it, using a salary lets you separate the ‘entitlement’ wage of the partner based solely on his partnership interest, from the wages he should be earning as an effective employee. the set payments can include salary or compensation for work, as well as compensation for the use of funds, similar to an interest payment.