CCA 200912029: A valid tax matters partner consent protected indirect S corporation shareholders

Plain-English summary

Chief Counsel considered whether separate limitations extensions were needed for an S corporation and its shareholders in a TEFRA case. The TEFRA proceeding controlled assessment of indirect partners holding their partnership interests through the S corporation, and the S corporation had no separate assessment period. Forms 872-I from partners or indirect partners were needed only if the validity of the tax matters partner's Form 872-P consent was doubtful. The S corporation generally was not itself a taxpayer and could not extend its shareholders' assessment periods, so any additional Form 872-I would come from the indirect shareholders.

Ruling snapshot

• Question: Were separate consents needed from an S corporation or its shareholders when a tax matters partner had extended the TEFRA period?
• Outcome: Advice given: no further extension was needed unless the tax matters partner consent was doubtful, in which case indirect partners should consent.
• Key authorities: IRC § 6229; Bufferd v. Commissioner, 113 S. Ct. 927 (1993); Sente Investment Club v. Commissioner, 95 T.C. 243 (1990).

Full text (IRS public release)

ID: CCA_2009022715091737 Number: 200912029
Release Date: 3/20/2009
Office: --------------
UILC: 6229.02-00

From: -------------------
Sent: Friday, February 27, 2009 3:09:19 PM
To: --------------------------------------
Cc: ------------------------------------------------------------- Subject: RE: Protecting S Corp & Shareholder Statutes on TEFRA case

There is no further extension needed. There is no separate S corporation statute. Bufferd v. Commissioner, 113 S.Ct. 927 (1993). The TEFRA proceeding controls the assessment of indirect partners that hold their partnership interest through an S corporation. See Sente Investment Club v. Commissioner, 95 T.C. 243 (1990). Partner or indirect partner consents (Forms 872-i) are only necessary if their is doubt as to the validity of a Tax Matters Partner consent on Form 872-P. We don't get Forms 872-i from S corporation since they generally are not taxpayers and have no power to extend the statutes of their shareholders. We would get a Form 872-i only from the indirect partners if there was any doubt about the TMP extension.