Recent TAM treats partnership as aggregate in applying sec. 1032.

• Author: Jackel, Monte A.
• Position: IRS Technical Advice Memorandum; IRC section 1032

The IRS has recently ruled, in Letter Ruling (TAM) 9822002, that a partner's exchange of its operating business for a partnership interest and cash and stock contributed to the partnership, by a corporate partner was a sale between the partnership and the partner. The Service further ruled that the partnership was an aggregate of its partners for Sec. 1032 purposes; thus, the corporate partner whose stock was used to acquire the business assets was entitled to nonrecognition treatment.

In the ruling, the corporation and partner formed a joint venture and, under a prearranged plan, the corporation contributed its stock and cash to the joint venture and the partner contributed a portion of its operating business. Immediately after these contributions, the partner withdrew the corporate stock and cash, but retained an interest in the joint venture along with the corporation and an affiliate of the corporation.

The IRS first concluded that the partner's transfer of a portion of its business to the joint venture in exchange for the corporation's stock and cash should be characterized as a sale of property by the partner to the joint venture and treated as a transaction between a partnership and a party...