CCA 200851048: A closing agreement signed by the tax matters partner is worth nothing, but Forms 870-PT are the real thing

Plain-English summary

The next morning's message in the thread that produced 0851053, and it closes the gap that release left open. The day before, the writer had said a partnership cannot bind any partner, so a concession by the partnership gives the Service nothing to assess and nothing that counts as a determination. Someone evidently proposed a way around that, and this is the reply.

The proposal was a closing agreement executed by the partnership through its tax matters partner, the partner designated to deal with the Service on the partnership's behalf. The answer is blunt: it would be a legal nullity, and you might as well get the janitor to sign it. The comparison is doing real work rather than being a joke. The objection is not that the tax matters partner is the wrong officer or lacks some procedural authorization that could be cured; it is that no one at the partnership level has the power to settle the individual partners' tax liabilities, so a signature there is no better than a signature from someone with no connection to the matter at all.

That leaves the two routes named in the earlier release: settlement agreements with the partners themselves, or a notice of final partnership administrative adjustment. Either produces a final determination; the closing agreement route does not.

The last sentence is the constructive part and the reason the release is worth reading. Mitigation depends on a determination as the Code defines it, and section 1313(a)(2) treats a closing agreement as one. The writer confirms that Forms 870-PT, the settlement agreements signed by partners on partnership items, qualify as closing agreements for this purpose, because they are executed under the authority of section 7121, the closing agreement provision, as the forms themselves state. So the substance the tax matters partner could not deliver is available after all, provided it is collected from the partners one by one on the right form. The form is not a lesser instrument standing in for a closing agreement; by its own terms it is one.

The release gives no citation for the nullity point and does not address how many partners must sign or what happens to those who do not. Read with 0851053, which sets out the underlying problem and the two year wait before a disposition of an administrative adjustment request becomes final, and with 0851083 in this batch, where a Form 870-PT is recommended as the easiest way to convert partnership items.

This is a clean digital release rather than a scan, so no OCR correction was needed. Kept as released: "TMP" and "FPAA" and "AAR" unexpanded; the plural "Forms 870-PT qualify as closing agreements" for a single form type; and the informality of the janitor sentence.

Ruling snapshot

• Question: Can a closing agreement executed by the partnership through the tax matters partner supply the final determination the mitigation provisions require?
• Outcome: Advice given. No. Such an agreement would be a legal nullity, and the writer says you might as well get the janitor to sign it. A final determination requires settlement agreements with the partners themselves or a notice of final partnership administrative adjustment. Forms 870-PT do qualify as closing agreements for this purpose under section 1313(a)(2), since they are executed under the authority of section 7121 as reflected in the forms themselves.
• Key authorities: IRC sections 1313(a)(2) and 7121; Form 870-PT.

Full text (IRS public release)

ID: CCA_2008102808552637 Number: 200851048
Office: ------------ Release Date: 12/19/2008

UILC: 1313.01-00

From: -------------------
Sent: Tuesday, October 28, 2008 8:55:27 AM
To: -----------------
Cc: ------------------------------------------------------------ Subject: RE: AAR

The only problem with the closing agreement by the partnership through the TMP is that it would be a legal nullity. You might as well get the janitor to sign it. So you would need settlement agreements with the partners themselves or an FPAA in order to have a final determination. Forms 870-PT qualify as closing agreements for this purpose under section 1313(a)(2) since they are executed under authority of section 7121 as reflected in the forms themselves.