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11 U.S.C. sec. 541(a)(1). As explained below, we agree. See
Gulley v. Commissioner, T.C. Memo. 2000-190 (“Petitioner’s
transfer of his interest in * * * [the partnership] to the
bankruptcy estate was not a change in interest requiring an
allocation of his distributive share of * * * partnership items
between himself and the bankruptcy estate for purposes of section
706(d)(1).”).
Section 706(d)(1) cannot be read in isolation. It must be
read in the larger context of section 706, particularly section
706(c). Prior to its amendment by DEFRA (discussed infra) but
following its amendment by the Tax Reform Act of 1976, Pub. L.
94-455, sec. 213(c)(1), 90 Stat. 1547, section 706(c)(2) provided
as follows:
(2) Partner who retires or sells interest in
partnership.–-
(A) Disposition of entire interest.–-The
taxable year of a partnership shall close–-
(i) with respect to a partner who sells
or exchanges his entire interest in a
partnership, and
(ii) with respect to a partner whose
interest is liquidated * * *.
Such partner’s distributive share of items
described in section 702(a) for such year shall be
determined, under regulations prescribed by the
Secretary, for the period ending with such sale,
exchange, or liquidation.
(B) Disposition of less than entire
interest.--The taxable year of a partnership shall
not close * * * with respect to a partner who
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