In Route 231 LLC v. Commissioner, the Tax Court found that a partnership’s transfer of Virginia Preservation Tax Credits to a partner who agreed to make a capital contribution of 53¢ for every $1 of tax credit received in exchange for a 1% partnership interest and the credits was not a capital contribution followed by an allocation of credits but rather was a disguised sale under IRC § 707, taxable to the partnership as income.
Read the full opinion here:
Route 231 LLC v. Commissioner, TC Memo 2014-30