Hello,

This might be a stupid question considering I have been part
of an Investment Club for three years. Better now than
later.

My friends and I run an Investment Club. We have only made
contributions since its inception in early 2005 and never
taken any distributions. However, I got taxed on my short
term and long term partnership gains in 2006 and 2007 even
though there was no distribution. Is that right? IRS
publication 541 for partnerships only talks about taxation
for distributions.

Until 2005 I used to file my taxes over the internet using a
software called Taxact Online. The software excluded my
partnership gain in 2005 from taxable income since all the
money was considered "at risk" and there was no
distribution.

In 2006 I moved to New York City and I used accountants
(CPAs) to file both 2006 and 2007 fiscal year taxes. I
clearly told them that my Investment Club (short/long term)
gain was a partnership gain, not a distribution and all at
risk. But they went ahead and populated row 5 (short term
capital gain from partnership) and row 12 (long term capital
gain from partneship) on Schedule D of Form 1040,
effectively increasing my taxable income.