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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.]
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