Ezel / IRS Rulings / 1042036
Chief Counsel Advice 1042036 Released October 22, 2010 Advice

CCA 1042036: TEFRA affected-item treatment depends on partner status

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This page covers one taxpayer's ruling from 2010, 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 2010
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 resolved one taxpayer's situation on its specific facts, 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

Chief Counsel addressed whether two tax consequences were affected items under the TEFRA partnership rules. The advice concludes that a tax issue at the corporate level was not an affected item because the corporation was not a partner in the partnership. It also concludes that a deemed gift by a nonpartner to partnership partners was not an affected item as to the nonpartner. Any gift tax would instead be asserted through a non-TEFRA notice of deficiency within the normal assessment period.

Ruling snapshot

  • Question: Are a corporate loan recharacterization and a deemed gift by a nonpartner affected items under the TEFRA partnership rules?
  • Outcome: Advice given
  • Key authorities: IRC § 6231

Full text (IRS public release)

ID: CCA_2010100508410537 Number: 201042036
Release Date: 10/22/2010
Office: ----------
UILC: 6231.05-00

From: -------------------
Sent: Tuesday, October 05, 2010 8:41:11 AM
To: --------------------
Cc: -------------------------------------------------------------
Subject: RE: TEFRA

  1. On the issue of whether the recharacterization of a loan by Corp A to Partnership B is an affected item
    as to Corp A: The tax at the Corp A level is not an affected item because Corp A is not a partner in
    Partnership B and is not bound the B's treatment or determination of the amounts received from A.
    Affected items only exist with respect to partners.

  2. Since Mom is not a partner in B, any deemed gift by her to the partners of B is not an affected item as
    to her. Thus, any gift tax would be asserted against her through a non-TEFRA notice of deficiency issued
    within her normal (non-TEFRA ) period for assessment.

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