Cold Body - Hot Assets: Entity and Aggregate Partnership Theories in Conflict; Treatment of IRC § 751(c) Unrealized Receivables Upon the Death of a Partner

The question of proper tax treatment of unrealized receivables of a partnership upon the death of a partner is used as a vehicle to explore the tension between entity and aggregate partnership theories. The death of a partner, and the subsequent disposition of his or her partnership interest, triggers the application of several sections of the Internal Revenue Code. The tax implications that follow such a disposition are examined for the purpose of determining which theory best describes the result required under the Code. Tax theory is then applied to determine how specific partnership unrealized receivables should be taxed consistent with the aggregate or entity partnership principles