Partnership Challenges IRS’ Treatment of Nonprofit’s Interest

A partnership is disputing the IRS’ determination that it has a $1.07 million underpayment, saying the agency wrongly found that a charitable organization was not a bona fide partner and incorrectly reallocated items to its individual partners.

Pedersen Legacy LLC, in a May 29 petition filed in US Tax Court, said the transfer of a 99% membership interest in it to a tax-exempt charitable organization before the tax year at issue had economic substance and was undertaken for valid non-tax purposes. It asked the Tax Court to eliminate the underpayment and an associated $213,642 accuracy-related penalty for the 2020 tax ...