Aron B. Katz and Phyllis A. Katz - Page 1

                                   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.           
                    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                  
                    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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