The opinion is dated July 24, 2026, but OTA published it on October 5, 2026, and commentators began covering it in early October. Whether the decision will be designated precedential has not been determined. The panel relied on the D.C. Circuit's decision in Rawat v. Commissioner, which held that a similar §751 gain was not U.S.-source income. If the decision is designated precedential, it would directly undermine LR 2022-02 and limit the FTB's use of §751(a) as an independent basis for sourcing partnership-sale proceeds to California.
Attorneys handling nonresident partnership-interest sales should check whether an FTB audit position relies on LR 2022-02 and whether the taxpayer's interest acquired a California business situs. The ruling does not reach every nonresident sale. Business situs, the structure of the ownership, and whether the income arises from partnership operations rather than from the sale of an ownership interest all still matter. Watch for whether OTA designates the decision precedential and for any FTB response to the reversal of its position.