Ezel / IRS Rulings / 1138040
Chief Counsel Advice 1138040 Released September 23, 2011 Advice

CCA 1138040: Recharacterizing qualified nonrecourse financing is a partnership item

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This page covers one taxpayer's ruling from 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 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 addressed whether the characterization of financing as qualified nonrecourse financing is determined at the partnership level. The advice concluded that determining or recharacterizing qualified nonrecourse financing as non-qualified nonrecourse financing is a partnership item. It cited the TEFRA partnership-item rules, a Tax Court memorandum decision, and regulations addressing amounts used to compute a partner's amount at risk under IRC § 465.

Ruling snapshot

  • Question: Is the determination or recharacterization of qualified nonrecourse financing a partnership item?
  • Outcome: advice given
  • Key authorities: IRC § 6231; Treas. Reg. § 301.6231(a)(3)-1(a)(1)(v), (vi)(C); Dakotah Hills v. Commissioner, T.C. Memo. 1996-35

Full text (IRS public release)

ID: CCA_2011072611321237 Number: 201138040
Release Date: 9/23/2011
Office: ----------
UILC: 6231.05-00

From: -------------------
Sent: Tuesday, July 26, 2011 11:32:18 AM
To: --------------------
Cc: ----------------------------------
Subject: RE: TEFRA question.

Yes. The determination that "qualified nonrecourse financing" is non-qualified non-recourse financing is a
partnership item whose determination or recharacterization must be made at the partnership level. See
Dakotah Hills v. Commissioner, T.C. Memo. 1996-35 and Treas. Reg. 301.6231(a)(3)-1(a)(1)(v) and -
1(a)(1)(vi)(C)(amounts enabling partner to compute at risk under section 465).

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