Ezel / IRS Rulings / 201109019

CCA 201109019: Redesignating a bankrupt tax matters partner is uncertain

Number
201109019
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Bankrupt Tax Matters Partner
Topics
Procedure, penalties, and administration
Code sections
§ 6231
Ruling dated
February 3, 2011
Publicly released
March 4, 2011
Source
View Official PDF

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This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2011, 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 2011
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

Chief Counsel advice addressed whether a tax matters partner who was terminated by bankruptcy could later be redesignated for the same partnership year. It said the answer was not certain. The advice discussed a Tax Court decision holding that a bankrupt tax matters partner could not automatically be redesignated under the largest-profits-interest rule in IRC § 6231(a)(7)(B). It noted that the regulations do not specifically prohibit a later redesignation by the partners, but warned of possible issues if the partnership had dissolved and been reconstituted, because the partner might not be a current partner in the same partnership.

Ruling snapshot

  • Question: Can partners redesignate a tax matters partner after the former tax matters partner emerges from bankruptcy?
  • Outcome: Advice given.
  • Key authorities: IRC § 6231(a)(7)(B); Treas. Reg. §§ 301.6231(a)(7)-1(b)(1)(ii) and related provisions; Barbados #7 v. Commissioner, 92 T.C. 804, 810-812 (1989).

Full text (IRS public release)

ID: CCA_2011020311555837 Number: 201109019
Release Date: 3/4/2011
Office: ----------
UILC: 6231.07-00

From: -------------------
Sent: Thursday, February 03, 2011 11:56:05 AM
To: -------------------
Cc: -----------
Subject: RE: Bankrupt TMP Question

The answer is not certain. In Barbados #7 v. Commissioner, 92 T.C. 804, 810-812 (1989) the court held that a TMP terminated as such by bankruptcy could not automatically be redesignated for the same year as TMP under the regulations applying largest profits interest rule of section 6231(a)(7)(B). The regulations do not specifically prohibit, however, a subsequent redesignation by the partners themselves after former TMP comes out of bankruptcy. Arguably that may be valid, but there may be some hazards associated with such a designation if the partnership is deemed to have dissolved and been reconstituted as a new partnership - an issue that is also discussed on Barbados #7. In that case, the partner may not be considered to be a "current" partner in the same partnership under Treas. Reg. 301.6231(a)(7)-1(b)(1)(ii).

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