CCA 200851046: Two consolidated parents in one year means two sets of partnership notices and possibly two assessments

Plain-English summary

A four-sentence procedural answer about where to send partnership notices when the partners are members of a consolidated group that changed hands mid-year.

The setup has to be reconstructed from the answer, since the question was not released. Partners in a partnership under audit are subsidiary corporations filing in a consolidated group. Within a single year those partners had two different common parents and were included in two different consolidated returns, which is what happens when the group is acquired part way through the year. Under the consolidated return rules the common parent acts as agent for its members in dealing with the Service, which is the subject the release is filed under, so the identity of the parent determines who gets served with what.

The practical difficulty is named first. An internal system referred to only as PCS automatically updates to the parent's address, so the address it carries follows whichever parent it holds and cannot by itself represent two of them. The release does not say what PCS is or how the automatic update is triggered.

The instruction is to serve everyone. Notices of beginning of administrative proceeding and notices of final partnership administrative adjustment should go to both parents and directly to the subsidiaries as well. Neither parent is treated as covering the whole year, and the agency of the common parent is not relied on to reach the subsidiaries, so the notices are sent three ways rather than left to flow through one address.

The closing point follows from the split. Because the partnership items are allocated between the two periods, there may ultimately be two separate assessments, one against each consolidated parent for the items allocated to its own part of the year. That is stated as a possibility rather than a certainty.

The release cites no Code section, revenue ruling or manual provision, and gives no reasoning beyond the instruction itself. The section recorded in the frontmatter is taken from the IRS subject classification assigned to the release, which points to the consolidated return rule making the common parent the agent for its subsidiaries; the document itself names nothing.

This is a clean digital release rather than a scan, so no OCR correction was needed. Kept as released: "PCS", "NBAPs" and "subs" unexpanded; the apostrophe in the plural "FPAA's"; and the abbreviated telegraphic style throughout.

Ruling snapshot

• Question: Where should partnership audit notices be sent when the partners belonged to two different consolidated groups, with two different common parents, in the same year?
• Outcome: Advice given. Issue notices of beginning of administrative proceeding and notices of final partnership administrative adjustment to both parents and directly to the subsidiaries. Because the partnership items are allocated between the two periods, there may ultimately be two separate assessments, one for each consolidated parent. The writer flags that the internal system referred to as PCS automatically updates to the parent's address.
• Key authorities: None cited in the release. The subject classification assigned to it points to the consolidated return rule treating the common parent as agent for its subsidiaries.

Full text (IRS public release)

ID: CCA_2008102911324237 Number: 200851046
Office: -------------- Release Date: 12/19/2008

UILC: 1502.77-00

From: -------------------
Sent: Wednesday, October 29, 2008 11:32:43 AM
To: ---------------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------
Subject: RE: ---------

PCS automatically updates to the parent's address. Since the partners have two separate parents for the same year, and two separate consolidated parent returns, NBAPs and FPAA's should be issued to both, as well as directly to the subs. Ultimately, there may also be two separate assessments: one for the first consolidated parent and one for the second consolidated parent for the partnership items allocated to each separate period.