Ezel / IRS Rulings / 200945067

TEFRA applies when a partnership return is filed, subject to the small-partnership exception

Number
200945067
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Similar rules in certain cases
Topics
Procedure, penalties, and administration
Code sections
§ 6233
Ruling dated
September 24, 2009
Publicly released
November 6, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Counsel advised that the partnership should be analyzed under both TEFRA and non-TEFRA rules, although the facts most closely supported TEFRA treatment. A filed partnership return makes TEFRA mandatory even if no partnership ultimately exists, unless the small-partnership exception applies. The exception does not apply here because a trust is a pass-through partner. Counsel also noted that a trust with a capital interest may be a partner even without a profits interest, depending on whether it contributed property and has a right to capital appreciation.

Ruling snapshot

  • Question: Does TEFRA apply, and can a trust qualify as a partner through a capital interest?
  • Outcome: Advice given
  • Key authorities: IRC § 6233; Supreme Court tests in Culbertson and Tower

Full text (IRS public release)

ID: CCA_2009092409455137 Number: 200945067
Release Date: 11/6/2009
Office: ----------
UILC: 6233.02-00

From: -------------------
Sent: Thursday, September 24, 2009 9:45:56 AM
To: -----------------------
Cc: -----------
Subject: RE: Is this a tefra partnership?

You should protect the statute both ways (TEFRA and Non-TEFRA), but this is most like subject to TEFRA. Section 6233(b) provides that TEFRA is mandatory if a partnership return is filed even if no partnership is ultimately found to exist. The only exception is if the small partnership exception applies. The existence of a pass-thru partner (the trust) makes this exception inapplicable. So TEFRA applies.

Furthermore, you don't need a profits interest to be a partner if you have a capital interest. If the trust actually contributed property and has a right to capital appreciation, it would meet the definition of a partner under the Supreme Court tests in Culbertson and Tower. Your facts do not indicate whether this is the case.

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