Aron B. Katz and Phyllis A. Katz - Page 17




                                       - 17 -                                         
          the partnership taxable year, for it is on this day that the                
          partner is treated as receiving his share of the aforementioned             
          partnership tax items.  See Gulley v. Commissioner, T.C. Memo.              
          2000-190.                                                                   
               1.   Respondent’s Position                                             
               Respondent contends that the general rules recited above are           
          sufficient to determine the proper reporting of the prepetition             
          partnership losses as between Mr. Katz individually and Mr. Katz’           
          bankruptcy estate.  Respondent’s two-step analysis proceeds as              
          follows:  First, under section 706(a), the partnerships are                 
          treated as distributing Mr. Katz’ 1990 distributive share of                
          partnership tax items on December 31, 1990, the last day of the             
          taxable year of each such partnership.  Second, given that Mr.              
          Katz’ bankruptcy estate succeeded to the partnership interests on           
          July 5, 1990, and held beneficial ownership of such interests on            
          December 31, 1990, all the 1990 calendar year distributive shares           
          (which include the prepetition partnership losses) belonged to              
          and were reportable by Mr. Katz’ bankruptcy estate under section            
          1398(e)(1).  Respondent’s analysis is consistent with the                   
          treatment of the issue in 15 Sheinfeld et al., Collier on                   
          Bankruptcy, par. TX13.04[2][d] (15th ed. rev. 2000):                        
               Thus, the partnership would allocate the entire year’s                 
               income or loss to the person who is the partner on the                 
               last day of the partnership’s taxable year.  If the                    
               debtor partner’s bankruptcy estate still exists when                   
               the partnership’s taxable year ends, the estate, not                   
               the debtor partner, would receive the allocation. * * *                
               [Fn. ref. omitted.]                                                    




Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011