Ezel / IRS Rulings / 201211017

CCA 201211017: Bankruptcy ends a TMP's status but not an indirect partner's TEFRA proceeding

Number
201211017
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Tax Matters Partner; Regulations with Respect to Certain Special Enforcement Areas
Topics
Procedure, penalties, and administration
Code sections
§ 6231
Ruling dated
February 14, 2012
Publicly released
March 16, 2012
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2012, 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 2012
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 addresses the effect of a bankruptcy claim on a pass-through entity serving as a tax matters partner. The advice states that if a theoretical claim could be filed in a bankruptcy proceeding, the TMP items convert under Treas. Reg. § 301.6231(c)-7 and the entity's TMP status terminates under § 301.6231(a)(7)-1(l). It further states that indirect partners remain in the TEFRA proceeding, citing Third Dividend Dardanos in the Ninth Circuit. The result described is that the bankrupt agent leaves the proceeding, but the indirect partner does not.

Ruling snapshot

  • Question: Does a pass-through entity's bankruptcy remove its indirect partners from a TEFRA proceeding?
  • Outcome: Advice given.
  • Key authorities: IRC § 6231; Treas. Reg. §§ 301.6231(c)-7 and 301.6231(a)(7)-1(l); Third Dividend Dardanos (9th Cir.)

Full text (IRS public release)

ID: CCA_2012021416003237 Number: 201211017
Release Date: 3/16/2012
Office: ----------
UILC: 6231.07-00, 6231.14-00

From: -------------------
Sent: Tuesday, February 14, 2012 4:00:46 PM
To: -------------------
Cc: -----------------------------------------------------------
Subject: RE: Pass-Through Entity as TMP files for Bankruptcy ---------

Yes. If a theoretical claim could be filed in a bankruptcy proceeding the TMP items convert under treas. Reg. 301.6231(c)-7and its status as TMP terminates under 301.6231(a)(7)-1(L), even if it is a pass-thru entity. But its indirect partners stay in the TEFRA proceeding under Third Dividend Dardanos (9th Cir). In other words, the bankruptcy of the agent through whom you hold your partnership interest takes your agent out of the proceeding, but does not take you, an "indirect partner" out. Id.
\f

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

  • Checks the law as it stands today, not only this page
  • Cites every source it relies on, so you can verify it
  • Chat, drafting and research in one workspace