Thursday, January 26, 2006
Jasper L. Cummings, Jr. (Alston & Bird, Atlanta) has published Partnership Nonrecognition on Issuing a Capital Interest, 110 Tax Notes 409 (Jan. 23, 2006), also available on the Tax Analysts web site as Doc 2005-25803, 2006 TNT 15-37
Here is the Conclusion:
It is entirely consistent with traditional tax policy and theory to require the partnership to recognize gain or loss on partnership property when it transfers a capital interest in the property as pay for services and claims a deduction for the value. That view has not been enough of an impediment to the creation of partnerships and the compensation of service partners to justify suggesting that there is some penumbral policy around § 721 that should preclude that gain recognition. If Treasury was thinking that it wanted to waive the "right" result for reasons of administrability, it should say so, rather than suggesting new theories about tax policy that can produce unintended results the next time a taxpayer wants to argue the policy of § 721.