Recent Developments

■ Estates, Trusts and Tax Matters
Partner (TMP).  Partnerships (including LLCs taxed as partnerships)
with more than 10 partners are subject to consolidated audit procedures. IRC
Sec. 6221. Partnerships/LLCs can designate a single partner as the TMP to
receive notice and make certain decisions. Treas. Reg. Sec. 301.6231. The TMP acts
on behalf of the partners in dealing with the IRS in a unified partnership
proceeding. The TMP is the general partner the partnership designates as such
on its return (Form 1065). If no designation is made the general partner with
the largest profits interest is the TMP. If the GP dies the remaining partners with
a majority interest in a partnership can designate a TMP. Treas. Reg. Sec. 301.6231(a)(7)-1(f).
In a recent IRS field advice the GP/TMP of multiple LLCs treated as
partnerships died.  The IRS determined
that the partnerships could select the trust to which the majority of property
passed as the new TMP, provided the trust is the general partner in each of the
partnerships at the time of designation. FAA 20103001F.

■ NY Trust Change Sign of Things to
Come. States remain
hungry for revenues. Who better to tax than a non-resident individual or
trust.  NY taxes the income of any NY
resident trust.  This generally includes
a trust established under the Will of a NY domiciliary, an inter-vivos trust by
a NY domiciliary. A NY resident trust doesn’t pay tax if: (i) none of the
trustees are NY domiciliaries, (ii) no trust assets are located in NY, and
(iii) the trust doesn’t have NY source income. NY resident trusts that are exempt
from tax must now file NY income tax returns. This isn’t a tax increase but a
clear effort to catch non-filers who owe many. TSB-M-10(5)I, 7/23/10. This and
other trust taxation/situs issues will be discussed at PLI’s “41st Annual
Estate Planning Institute,” on September 13-14, 2010 in NYC. Call 212-824-5700
for info.