Jurisdiction Lacking Over a Partner’s Readjustment Petition Where a Timely Petition Already Filed by Tax Matters Partner (Devonian Program, TCM)

An individual partner’s petition for readjustment of a notice of final partnership administrative adjustment (FPAA) was dismissed for lack of jurisdiction because a timely readjustment petition had been already filed by the partnership’s tax matters partner (TMP). The corporation was the partnership’s general partner and TMP, contrary to the argument of the individual partner, who was also the sole shareholder and the president of the corporation. The subscription agreement executed by the corporation incorporated a private placement memorandum that identified the corporation as the partnership’s TMP and gave it exclusive and complete discretion and control over the partnership’s management, business and affairs. The subscription agreement and the private placement memorandum also provided that the corporation would receive, in addition to a flat fee for services rendered, a 17-percent interest in the partnership’s revenues, for which it would pay $3,000. Moreover, in a letter sent in response to an IRS audit-related request, the corporation’s president admitted that the corporation was a general partner in the partnership and that it had contributed the $3,000 for the 17-percent interest in the partnership. The enclosed Schedules K-1 for the tax years subject to the audit also identified the corporation as a general partner and confirmed its capital interest and the $3,000 contribution. Further, the partnership return filed for one of the years in question designated the corporation as the partnership’s TMP.

Devonian Program, TC Memo. 2010-153, Dec. 58,271(M)

Other References:

Code Sec. 6226

CCH Reference – 2010FED ¶37,709.60

Code Sec. 6231

CCH Reference – 2010FED ¶37,849.05

Tax Research Consultant

CCH Reference – TRC LITIG: 7,150

CCH Reference – TRC PART: 60,552


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