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The distribution of profits reported on the K-1 does not represent cash taken out of the Corp.

I think that misses the OP's question.
I think he's concerned with how to minimize overall taxes for 2010 and 2011, knowing that 2010 has significant profit, while 2011 will have significant expenses.
Should he try to move some expenses into 2010?
Does it matter?

My guess is it might not matter once you get to time where you're filing taxes for 2011 (eg. April 2012) - other than a possible interest-free loan to the US govt.

Here's one more spin on it - wouldn't he be better having a more level income for this year and next year? (ie. not in a higher bracket this year and a much lower one next year) Because I'm thinking if he's just slightly profitable for 2011, he doesn't get to carry-back anything to 2010. But that might mean that 2011 his final incremental tax bracket is much lower than his 2010 bracket.
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