working partner. You shared so little about the situation that any good CPA is going to need a lot more information to give you sound advice. I am hopeful they have a signed partnership agreement because I have seen so many businesses like this end up being a nightmare because the owners were too cheap or too stupid to hire a competent CPA an attorney when the business started.

The real answer is that the allocation has to have economic substance. Meaning, if you are just allocating income to one partner to reduce the overall tax burden of both parties it probably isn't going to fly. But likelihood of being audited is essentially zero. Reality is that I wouldn't allocate anything different than ownership. If both own 50% then allocate it 50%. If the nonworking partner is currently working more than the working partner, give the nonworking partner (who is working more at the partnership) a guaranteed payment for his services and then split the rest 50/50.