General partner could extend limitations period

Article Abstract:

The Tax Court has ruled, in a 1997 case, that a partnership agreement is adequate written evidence of a general partner's power to extend the limitation period of the partnership. The case involved a horse racing and breeding partnership, which wrote an agreement giving the general partner the exclusive authority to manage the partnership. This general partner filed for resignation after selling his interest and was replaced by an interim general partner who bought the former's interest. The IRS agreed that the partnership did not have a tax matters partner, which meant that the limitations period could be extended only by an individual recognized by the partnership in written form. The taxpayer proved that the general three-year statute lapsed in 1987 but the IRS released a valid consent extending the limitation. The court found that the extension was valid and the limitations period had not ended.

Tax extensions

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Regs. explain when marketable security is treated as money

Article Abstract:

Proposed Regulations issued by the IRS under Sec. 731(c) treats a partnership's distribution of marketable securities to a partner as money to enable the partner to recognize gain but not loss on the allocation. Under these Proposed Regulations, the amount of a distribution recognized as money is lowered by the excess of the partner's share of net appreciation in all types of marketable securities before the distribution over the partner's share of the net gain right after the allocation. Therefore, a partner will acknowledge gain on a distribution of marketable securities only if it is in exchange for the partner's share of appreciated assets aside from marketable securities. The Regulations take effect for distributions to a partner made after Dec. 28, 1995.

Money, Partnership distributions

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Only TMP can extend limitations period

Article Abstract:

The Tax Court found in 'Medical and Business Facilities' that a general partner who is not the tax matters partner (TMP) does not have the authority to execute a consent to extend the limitations period for a partnership. In this case, the assistant managing partner who believed that he was the TMP signed the consent form on the line assigned to the TMP. When the partnership received documents related to a prior tax year, it lodged a protest arguing that the limitations period had lapsed for the tax years of concern because the assistant managing partner did not have the right to extend the period. The Tax Court sided with the IRS. It found that the partnership agreement as well sa the state law gave the general partner the power to bind the partnership.

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