116 T.C. No. 2
UNITED STATES TAX COURT
ARON B. KATZ AND PHYLLIS A. KATZ, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 460-96, 780-97, Filed January 12, 2001.
181-98.
P-H, a calendar year taxpayer, owned interests in
several calendar year partnerships. P-H filed a
bankruptcy petition on July 5, 1990. P-H included the
portions of his distributive shares attributable to the
period prior to his bankruptcy filing on his separately
filed 1990 income tax return. The remainder of those
distributive shares were reported by P-H’s bankruptcy
estate.
Held: The manner in which the distributive share
of a partner in bankruptcy is allocated between the
partner and the bankruptcy estate is not a “partnership
item” under sec. 6231(a)(3), I.R.C. Accordingly, such
allocation need not be resolved in a partnership-level
proceeding pursuant to the uniform audit and litigation
procedures of secs. 6221-6234, I.R.C.
Held, further, where a partner’s bankruptcy estate
retains beneficial ownership of a partnership interest
as of the close of the partnership taxable year, the
partner’s distributive share for the entire partnership
taxable year is reportable by the bankruptcy estate.
See secs. 706(a), 1398(e), I.R.C.
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