I am a CPA tax preparer but cannot find a clear answer to this question.

I have a client partnership with two S-Corps as partners. Cash is being distributed monthly based on profits of the partnership. I am treating these as distributions, thus the "profit" eventually flows to the Partner K1's (S-Corps) at 100%. I THINK that part of the accounting is correct, as payments cannot be made to the S-Corp partners as an expense of the Partnership, correct?

What I'm having trouble with is recording on the S-Corp side of the books so as not to cause double taxation on the S-Corp shareholders. If I treat the cash received & deposited as a Revenue it ends up recognizing the income twice - once through the P&L and again from the K1 when reflected in the S-Corp tax return.

This can't be right, so how do I handle this?

Any help or reference to a reliable source would be appreciated.

Thanks.