Gain in Partnership Mergers - Recent Guidance Welcome but Disappointing

Abstract:     
In Revenue Ruling 2004-43 (2004-18 I.R.B. 842), the Internal Revenue Service announced its conclusion that all unrealized book gain in assets deemed transferred as part of a partnership merger are subject to the anti-mixing bowl rules of sections 704(c)(1)(B) and 737 for seven years after the merger. Starting a new seven-year clock in such circumstances cannot be justified by the policies underlying the anti-mixing bowl rules and is plainly inconsistent with long-standing regulations promulgated under both section 704(c)(1)(B) and section 737. Revenue Ruling 2004-43 is incorrect in its conclusion and should not be upheld.

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