KPMG analysis: Third Circuit’s decision on partnership transfer of historic rehabilitation tax credits 

September 10: The U.S. Court of Appeals for the Third Circuit Court, in Historic Boardwalk Hall LLC v. Commissioner, rearticulated the Culbertson test for determining if an investor is properly treated as a partner in a partnership. It then applied the test to the taxpayer’s investment in a partnership created to facilitate the allocation of federal rehabilitation tax credits to the investor.

Disagreeing with the Tax Court, the Third Circuit undertook a detailed review of the substance of the arrangement in which the investor received its interest in the partnership. The Third Circuit held that the interest the investor received lacked sufficient substance to be treated as a bona fide equity participation in the partnership. As such, the investor was denied the allocation of the federal rehabilitation tax credits from the partnership.


Read a September 2012 report [PDF 76 KB] prepared by KPMG LLP that examines the Third Circuit’s decision.




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