Michael Love (Columbia; Google Scholar), Who Benefits from Partnership Flexibility?:

Partnerships (including LLCs) account for more than one-third of US business profits. A key feature they offer owners and investors is unparalleled flexibility to divide up income and losses, but this creates opportunities to lower taxes—a well-recognized concern since the 1950s. Yet little is known about what happens in practice. Using anonymized tax records, I estimate over $300 billion of tax benefits associated with this flexibility between 2011-2020. 

But these benefits are narrowly concentrated in only 9% of firms, generally larger and more complex firms, while the vast majority of firms—especially smaller operating firms—do not utilize this flexibility at all.

Editor's Note:  If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.