CCA 200910044: The taxpayer and subsidiary should sign a settlement covering affected items

Number

200910044

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Settlement Agreement

Topics

Procedure, penalties, and administration

Code sections

§ 6224

Ruling dated

January 14, 2009

Publicly released

March 6, 2009

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 2009, 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 both the ultimate taxpayer and its subsidiary should sign the settlement. A settlement by a pass-through partner binds indirect partners as to partnership items, but it cannot bind them on affected items or partner-level penalty defenses. Form 870-LT was therefore preferable to Form 870-PT in this situation. Form 870-LT covers both partnership and affected items, while Form 870-PT covers only partnership-level items.

Ruling snapshot

Question: Who should sign the TEFRA settlement, and which settlement form should the IRS use?
Outcome: Advice given: obtain signatures from the ultimate taxpayer and subsidiary and consider Form 870-LT.
Key authorities: IRC § 6224(c)(1); Treas. Reg. §§ 1.1502-77(a)(6)(iii) and 301.6224(c)-2.

Full text (IRS public release)

ID: CCA-114303-09 Number: 200910044
Release Date: 3/6/2009
Office: -------------
UILC: 6224.01-01

From: --------------------
Sent: Wed 1/14/2009 3:03 PM
To: -------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: FW: TEFRA Question

Both the ultimate taxpayer and its sub should sign. See Treas. Reg. 1.1502-77(a)(6)(iii). Even though a settlement by a pass-thru partner binds indirect partners (I.R.C. 6224(c)(1)(last sentence; Treas. Reg. 301.6224(c)-2) a pass-thru partner cannot bind an indirect partner as to affected items and partner-level penalty defenses. For this reason you may also want to use the Form 870-LT rather than a Form 870-PT. The Form 870-LT deals with both partnership items and affected items unlike the Form 870-PT which only deals with partnership-level items. --------------------------------------------------------------------------------------------
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