CCA 201326018: A paid manager is a tax matters partner only if the person is a partner for federal tax purposes

Plain-English summary

The Chief Counsel's Office addressed whether a paid manager described as a partner under state law could be the federal tax matters partner. It said the person is not a partner for federal tax purposes unless the person has a capital or profits interest under the standards from the Supreme Court's Culbertson and Tower cases. A zero amount on Schedule K-1 may not resolve the question because the person's interest could include future profits or capital appreciation. If the listed general partner is a federal tax partner and the only general partner, that person is the tax matters partner under the default rule in section 6231(a)(7)(B).

Ruling snapshot

• Question: When is a manager called a partner under state law the federal tax matters partner?
• Outcome: Advice given
• Key authorities: IRC § 6231(a)(7)(B); Culbertson and Tower cases

Full text (IRS public release)

ID: CCA_2013061009503801 Third Party Communication: None

UILC: 6231.07-00
Date of Communication: Not Applicable

Number: 201326018
Release Date: 6/28/2013
From:
Sent: Monday, June 10, 2013 9:50:38 AM
To:
Cc:
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Subject: RE: Quick TEFRA question

Some states call a paid manager a “partner” . But such a person is not a partner for federal tax purposes unless they have a capital or profits interest under the Supreme Court standard in the Culbertson and Tower cases. A K-1 amount of zero may not be determinative since profits include future profits and the person may have an interest in capital appreciation. But if the listed general partner is, in fact, a partner under this standard and is the only general partner, it would be the TMP under the default rule of section 6231(a)(7)(B).