CCA 201107016: A liquidating trustee is not automatically the Tax Matters Partner

Plain-English summary

Chief Counsel advice concludes that a liquidating trustee for a partnership is not the Tax Matters Partner under IRC § 6231(a)(7) merely because the trustee controls partnership assets. The Tax Matters Partner must be properly designated under the regulations and represents the partners in a TEFRA partnership proceeding. The advice also notes that the partnership is generally not itself a party to that proceeding because it typically has no income tax liability, and it addresses allowing a loss in the year it is properly allowable under an existing proceeding.

Ruling snapshot

• Question: Does a liquidating trustee with authority over partnership assets become the Tax Matters Partner?
• Outcome: Advice given.
• Key authorities: IRC § 6231(a)(7); Chef's Choice v. Commissioner; American Principles Leasing.

Full text (IRS public release)

ID: CCA_2011011308525137 Number: 201107016
Release Date: 2/18/2011
Office: ----------
UILC: 6231.07-00

From: -------------------
Sent: Thursday, January 13, 2011 8:52:59 AM
To: --------------------
Cc: ----------------------------------
Subject: RE: Court designation of Liquidating Trustee with authority similar to TMP ---------

A liquidating trustee for a partnership would not be the Tax Matters Partner under section 6231(a)(7). The trustee only has power over the partnership assets. The TMP, on the other hand, must be properly designated in accordance with the regulations and is the representative of the partners in a TEFRA partnership proceeding. The partnership is typically not a party to the TEFRA partnership proceeding since it generally has no income tax liability of its own. See Chef's Choice v. Commissioner (partnership not a party to the TEFRA proceeding) and American Principles Leasing (partnership bankruptcy proceeding does not concern the tax liabilities of the partners at issue in a separate TEFRA partnership proceeding).

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---------------------------------------- As you note, we can allow the loss in the year that you have determined it is properly allowable pursuant to the existing proceeding for that year.