Ezel / IRS Rulings / 1044010
Chief Counsel Advice 1044010 Released November 5, 2010 Advice

CCA 1044010: Partnership-level treatment applies to a loan recharacterization issue

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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 Advice states that issues concerning whether a loan from a partner to a partnership should be recharacterized as a sale are partnership items that must be determined at the partnership level. The advice notes that the merits of the adjustment may implicate the disguised-sale rules under IRC § 707. It also concludes that settlement agreements by indirect partners can convert the issue to a nonpartnership item for those partners, so they will not be parties to the partnership proceeding on that issue under IRC § 6226(d)(1)(A).

Ruling snapshot

  • Question: At what level should a loan recharacterization issue and related settlement agreements be determined?
  • Outcome: Advice given
  • Key authorities: IRC §§ 6226, 6231, and 707; Treas. Reg. §§ 301.6231(a)(3)-1(a)(4)(iii) and 301.6231(a)(3)-1(c)(4)

Full text (IRS public release)

ID: CCA_2010101514581437 Number: 201044010
Release Date: 11/5/2010
Office: ----------
UILC: 6231.03-00

From: -------------------
Sent: Friday, October 15, 2010 2:58:17 PM
To: --------------------
Cc: -----------
Subject: RE: New TEFRA case ---------

The merits of the adjustment are outside of my jurisdiction and could arguably be governed by the
disguised sale rules of 707 as to timing, etc..

All of the issues you raise concerning the recharacterization of a loan from a partner to Partnership B
having to be recognized as a sale from the partner to the partnership are partnership items of Partnership
B that must be determined at the Partnership B level. See Treas. Reg. 301.6231(a)(3)-1(a)(4)(iii) and -
1(c)(4).

The settlement agreements by the indirect partners are valid and convert the issue to a nonpartnership
item for them. Consequently, they will not be a party to any proceeding for Partnership B for this issue
under section 6226(d)(1)(A).

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