CCA 200911022: Settled partners and tiered items limited a tax matters partner's adjustment request

Plain-English summary

Chief Counsel advised that a tax matters partner's administrative adjustment request would be a nullity if all partners had signed Forms 870-PT for the year, because no partner would remain a party subject to the request. A request concerning partnership items flowing from another partnership also would not qualify at this level because those items had to be determined in a proceeding for the source partnership. If a request was valid and produced a refund, accepted adjustments could offset it within two years after the last timely request. Under Lewis v. Reynolds, a refund may be reduced after the assessment period expires because the reduction is not an assessment. If the result instead required an actual assessment, section 6501(c)(7) could extend the period for certain claims filed shortly before expiration.

Ruling snapshot

• Question: When were the tax matters partner's adjustment requests valid, and how could resulting refunds or assessments be handled?
• Outcome: Advice given: settled partners or source-partnership items could invalidate a request, while separate timing rules governed offsets and assessments.
• Key authorities: IRC §§ 6226(c)-(d), 6227(c), 6228(a), and 6501(c)(7); Lewis v. Reynolds.

Full text (IRS public release)

ID: CCA_2009020414151237 Number: 200911022
Release Date: 3/13/2009
Office: --------------
UILC: 6227.02-00

From: -------------------
Sent: Wednesday, February 04, 2009 2:15:15 PM
To: --------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: 4 AARs files

If all the partners signed Forms 870-PT for the partnership year, the TMP AAR is a nullity since no partner would be a "party" subject to the request. See I.R.C. 6226(c) and (d) and 6228(a)(4).

This also would not be a TMP AAR under section 6227(c)(1) if it relates to partnership items flowing from another partnership. Since such items cannot be determined at the partner-level, we could not issue an FPAA at this level under section 6227(c)(2)(A)(ii). We would have to conduct a TEFRA proceeding for the source partnership instead.

If the AAR is valid, the net result would be a refund. Any accepted adjustment offsetting this refund could be made within the two year period of section 6228(a)(2), calculated from the last timely filed AAR. Under the Supreme Court precedent in Lewis v. Reynolds, offsets to refunds can be made after the period for assessment has expired since a reduction on a refund is not an "assessment" subject to the period for assessment. If for some reason, however, the partners had already reported the amounts correctly except for the last adjustment, so that an actual assessment would result, the assessment period can be extended under section 6501(c)(7) for claims filed within 60 days the expiration of the assessment period.