MINOR MEMOS: The IRS has asked for comments on “disguised” sales of partnership interests

MINOR MEMOS: The IRS has asked for comments on “disguised” sales of partnership interests

December 01, 2001

MINOR MEMOS: The IRS has asked for comments on “disguised” sales of partnership interests. The issue is when should the IRS treat partners whose interests are diluted downward after the admission of a new partner as having sold part of their interests to the new partner. That could trigger a gain. It would only happen in cases where cash the new partner put into the partnership was effectively distributed to the existing partners. Comments are due by March 31. . . . The head of the large and mid-size business division at the IRS said the agency is concerned about cases where corporate partners walk away from partnerships with large deficits in their capital accounts and the partnership fails to file its last tax return . . . . Pamela Olson, the number two tax policy official in the US Treasury, said on October 19 that the government is considering waiving penalties for companies who voluntarily disclose their participation in certain aggressive tax schemes that the IRS has targeted on audit. The government will want copies of any marketing materials and the name of the broker who sold them the transaction. It will then go after the broker for his customer lists.

Keith Martin