CCA 200910046: Settlement disclosures let remaining partners seek consistent treatment

Plain-English summary

Tax Court Rule 248 required disclosure of settled partners' identities to the tax matters partner when settlement occurred after docketing. A pre-litigation settlement presented a potential disclosure issue because a settling partner was no longer a party to the TEFRA administrative proceeding. Remaining partners nevertheless had consistent-settlement rights under section 6224(c)(2), and the tax matters partner had to notify them of settlement terms. Chief Counsel advised disclosing pre-litigation settlements to the tax matters partner because the settling partners had been parties before settlement and the terms directly affected the remaining partners' consistent liabilities.

Ruling snapshot

• Question: Could settlement information be disclosed to the tax matters partner before or after the partnership case was docketed?
• Outcome: Advice given: post-docket disclosures were required, and pre-litigation settlements could be disclosed to support consistent-settlement rights.
• Key authorities: IRC §§ 6103(h)(4), 6223(g), and 6224(c)(2); Treas. Reg. § 301.6223(g)-1; Tax Court Rule 248; Abelein v. United States.

Full text (IRS public release)

ID: CCA-114403-09 Number: 200910046
Release Date: 3/6/2009
Office: -------------
UILC: 6103.11-00

From: --------------------
Sent: Wed 1/14/2009 4:03 PM
To: ------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: TEFRA/disclosure question

If the partners settled after the case became docketed, you are required by Tax Court Rule 248 to disclose the identity of the settled partners to the TMP.

If the settlements occurred before the case became docketed, there is an arguable disclosure problem because partners who have settled are no longer parties to the TEFRA administrative proceeding under section 6103(h)(4)(A) pursuant to Abelein v. United States, (9th Cir. Case). Nevertheless, the remaining partners have the right to consistent settlements under section 6224(c)(2). The TMP is required to forward notice of such settlements to the remaining partners under Treas. Reg. 301.6223(g)-1(b)(iv). Subsection -1(a)(2)(i) provides that the TMP does not need to notify partners whose items have previously converted to nonpartnership items (by settlement of otherwise).

Based on the forgoing, we disclose pre-litigation settlements to the TMP so that he can forward the settlement terms to partners who can then exercise their consistent settlement rights. Disclosure is permitted since the settling partners were parties to the proceeding under section 6103(h)(4)(A) before settlement and the remaining partners have the right to know of the settlement because it affects their own "consistent" liability under section 6103(h)(4)(B)("directly related to the resolution of an issue in the proceeding").

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