Illusory Partnership Interests and the Anti-Antiabuse Rule

11 Pages Posted: 11 Aug 2011 Last revised: 11 Sep 2015

See all articles by Karen C. Burke

Karen C. Burke

University of Florida Levin College of Law

Grayson M.P. McCouch

University of Florida Levin College of Law

Date Written: August 10, 2011

Abstract

In this special report, the authors examine the continuing validity of the Culbertson standard for determining the validity of a partnership for federal income tax purposes. In recent litigation, notably Castle Harbour, taxpayer’s counsel have argued that section 704(e)(1) validates partner status based solely on ownership of a capital interest, making Culbertson essentially irrelevant for capital-intensive partnerships. This argument seeks to portray section 704(e)(1) as a repudiation of Culbertson and related doctrines underlying the partnership anti-abuse rule. Properly understood, however, section 704(e)(1) was never intended to validate illusory partnership interests or to sanction the use of partnerships for tax avoidance purposes.

Keywords: partnership, member, economic substance, check-the-box, Castle Harbour, Culbertson

JEL Classification: K34

Suggested Citation

Burke, Karen C. and McCouch, Grayson M.P., Illusory Partnership Interests and the Anti-Antiabuse Rule (August 10, 2011). Tax Notes, August 2011, Available at SSRN: https://ssrn.com/abstract=1907870

Karen C. Burke (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

Grayson M.P. McCouch

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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