Partnership 2 gets a K-1 from another partnership 1 it owns. The k-1 has book to tax difference. Page 1 of the K-1 has income/loss items and then the supplementary page has the reconciliation of the book to tax difference. How is the income treated at the level of Partnership 2. Does Partnership 2 pick up the taxable income only and track the book to tax difference separately?

Say the taxable income is 100 and there is a 20 book tax difference. So book income is 120 and taxable income is 100. Through this example please provide thought on how the income is treated at Partnership 2 level.