CCA 200848048: Source-partnership FPAA generally binds tiers and cannot be withdrawn

Plain-English summary

Chief Counsel advised that an FPAA could not be revised or withdrawn after issuance, although the IRS could raise additional issues if the case was petitioned. Generally, one FPAA to the source partnership bound all tiers and permitted computational assessments against indirect partners. Additional partner-level determinations instead required affected-item FPAAs for tier partnerships or affected-item deficiency notices for ultimate individual or C corporation taxpayers. Only the consolidated parent had to sign Form 870-P, and its Form 872-I covered the group, though signatures from actual subsidiary partners were desirable when feasible. An FPAA could be issued for the year a partnership claimed a loss even when the transaction increasing asset basis occurred earlier.

Ruling snapshot

• Question: How do FPAAs operate through tiered partnerships, and who signs partnership forms for a consolidated group?
• Outcome: Advice given. Use the source-partnership FPAA for computational flow-through, affected-item procedures when further determinations are needed, and parent-level consolidated signatures.
• Key authorities: IRC §§ 1501 and 6223.

Full text (IRS public release)

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ID: CCA-721150-08 Number: 200848048
Office: --------------
Release Date: 11/28/2008

UILC: 6223.00-00, 1501.00-00

From: -------------------
Sent: Mon 7/21/2008 3:05 PM
To: ----------------------------------------------------------------- Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: Counsel questions for New Orleans meeting

I have assigned the TMP questions to -------------------.

On the remaining questions:

(1) Hot topic: A -----------------------------------------------------------------------------------------------------
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(2) TMP issues (-------------------)

(3) We cannot revise or withdraw an FPAA after issuance. If it is petitioned, we can raise additional issues. We generally issue an FPAA only to the source partnership which will be binding on all of the tiers. We generally can then assess all the indirect partners without issuing an additional FPAA to any tier TEFRA entity as long as the source partnership items flow through computationally. If additional partner-level determinations are required, we must issue affected item FPAA's to the tier partners that are themselves partnerships or affected item notices of deficiency to the ultimate taxpaying individuals or C corporations.

(4) Only the parent of a consolidated group need sign a Form 870-P. If a sub is the actual partner, we may want them to sign as well if we can, but this should not be critical. A parent 872-i will cover all members of the consolidated group as well - but the actual sub partners should sign as well if feasible.

(5) An FPAA can be issued to the partnership for any year it takes a loss, even if the basis pump of the partnership assets occurred in an earlier year.