Regulations with Respect to Certain Special Enforcement Areas

ID: CCA_2012090613263737 Number: 201241007
Release Date: 10/12/2012
Office: ---
UILC: 6231.14-00
From: ---
Sent: Thursday, September 06, 2012 1:26:58 PM
To: ---
Cc: ---
Subject: RE: Bankruptcy of a partner which is a DE.
Where Z owns Y LLC (a disregarded entity) which a partner in TEFRA partnership and Y LLC files for bankruptcy, this does not cause Z's partnership items to convert to nonpartnership items. See Third Dividend Dardanos v. Commissioner, 96-2 USTC 50,066 (9th Cir). This is because Z's tax liability is not at issue in the DE's bankruptcy proceeding and the bankruptcy conversion regulation under Treas. Reg.
301.6231(a)(7)-1 only converts items that are subject to an income tax claim in the bankruptcy proceeding.