- 12 -
relevant allocation is not expressly within the scope of section
6226(f). See, e.g., Hang v. Commissioner, 95 T.C. 74, 80 (1990)
(describing an allocation of subchapter S items between a
shareholder of record and the purported beneficial owner of such
shares as not expressly within the scope of section 6226(f)).7
c. Proper Allocation Inquiry
The issue that we must decide is, once a partnership has
allocated partnership items in respect of the interest of a
partner who has commenced a bankruptcy proceeding during the
partnership taxable year, whether the subdivision of those items
between the partner and his bankruptcy estate constitutes a
partnership item under the TEFRA procedures. Resolution of this
is tantamount to determining whether a partner in bankruptcy and
7 Pursuant to the S corporation audit and litigation
procedures (S corporation procedures), secs. 6241 through 6245, a
“subchapter S item” is defined as “any item of an S corporation
to the extent regulations prescribed by the Secretary provide
that, for purposes of this subtitle, such item is more
appropriately determined at the corporate level.” Sec. 6245.
The tax treatment of a subch. S item generally must be determined
in a corporate-level proceeding. See sec. 6241.
The S corporation procedures were enacted shortly after the
TEFRA procedures as part of the Subchapter S Revision Act of
1982, Pub. L. 97-354, sec. 4(a), 96 Stat. 1691. (The S
corporation procedures were repealed as of Dec. 31, 1996, by the
Small Business Job Protection Act of 1996, Pub. L. 104-188, sec.
1307(c)(1), 110 Stat. 1781.) Sec. 6244 makes certain provisions
of the TEFRA procedures relating to partnership items applicable
to subch. S items, except as modified or made inapplicable by the
regulations. Among the incorporated provisions is sec. 6226,
which governs the judicial determination of partnership items.
See sec. 6244(2); see also S. Rept. 97-640, at 25 (1982), 1982-2
C.B. 718, 729.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011