CCA 200848069: Pass-through partners may pay tax for hundreds of indirect partners

Number

200848069

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Tax Matters Partner May Bind Certain Other Partners

Topics

Procedure, penalties, and administration

Code sections

§ 6224

Ruling dated

August 20, 2008

Publicly released

November 28, 2008

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2008, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

Chief Counsel advised that two pass-through partners could legally pay tax on net partnership adjustments at the highest marginal rate rather than flowing the adjustments through to hundreds of indirect partners. The pass-through entities would report those payments as distributions on the Schedules K-1 of the partners for whom they paid. That reporting would place both the partners and the IRS in the same economic position as individual flow-through adjustments and assessments. Whether to accept the procedure remained within Examination's discretion.

Ruling snapshot

Question: May pass-through partners pay tax on net adjustments for numerous indirect partners instead of processing individual assessments?
Outcome: Advice given. The arrangement is legally permissible, but Examination decides whether to accept it.
Key authorities: IRC § 6224.

Full text (IRS public release)

ID: CCA-820855-08 Number: 200848069
Office: --------------
Release Date: 11/28/2008

UILC: 6224.01-05

From: -------------------
Sent: Wed 8/20/2008 8:55 AM
To: ----------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Subject: RE: ---------- Payment Option Request

It is legally permissible to have the two pass-through partners pay a tax on the net adjustments passing though them at the highest marginal tax rather than flowing the adjustments to the hundreds of indirect partners. I understand that the pass-through partners will reflect the payments as distributions on Schedules K-1 to the partners on whose behalf the payments are made so that, economically, both the partners and the Service will be put in the same situation as if the Service Center flowed through all of the adjustments and the partners had paid the assessments individually. Ultimately, the decision to agree to this procedure is up to Exam.
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