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CLLA Update-Informal Guidance from IRS Addresses Partnership Issues in Bankruptcy

Sharon Edmondson, Washington Legislative Team Member | April 08, 2015

The IRS’s Office of Chief Counsel released informal legal advice addressing Tax Equity and Fiscal Responsibility Act (TEFRA) partnership issues (CCA 201510044). The IRS concluded that a parent company’s bankruptcy does not convert the partnership items of a non-bankruptcy subsidiary corporation for the partnership in which the subsidiary is a partner. The IRS said it would have to assess only the subsidiary based on the outcome of the TEFRA partnership proceeding using the consolidated return to compute the several liability to be assessed against the subsidiary.

The IRS would collect the several liability only once, but who the IRS collects against may depend on who still has assets to satisfy the collection.

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