CCA 200913014: A courtesy TEFRA notice did not restart the 120-day period

Plain-English summary

Chief Counsel approved sending a replacement notice beginning a TEFRA administrative proceeding as a courtesy. Because the original notice had been properly sent, the replacement would not restart the 120-day waiting period for a final partnership administrative adjustment. Even if the replacement counted as the first notice, an adjustment issued during that period would not be invalid. Instead, section 6223(e) would let the partner elect to convert partnership items to nonpartnership items within 45 days after receiving the adjustment, after which the IRS would have one year to issue a deficiency notice.

Ruling snapshot

• Question: Would a courtesy replacement notice restart the 120-day TEFRA period or invalidate an adjustment issued during that period?
• Outcome: Advice given: it would not restart the period, and even a premature adjustment would trigger the partner's conversion-election remedy rather than become invalid.
• Key authorities: IRC § 6223(e).

Full text (IRS public release)

ID: CCA-618222-08 Number: 200913014
Release Date: 3/27/2009
Office: --------------
UILC: 6223.00-00

From: -------------------
Sent: Wed 6/18/2008 4:22 PM
To: --------------------
Cc: -------------------------------------------------------------------------------------------------------------------
Subject: RE: TEFRA Proceedings returned NBAP

I have no problem with sending a new NBAP as a courtesy. It will not restart the 120 day period since the
NBAP was previously properly sent in accordance with the statute and regulation.

Even if it were to be considered the first NBAP implicating the 120 rule, this would not invalidate any
FPAA issued within the 120 period. Under section 6223(e), partner would just have an option to file an
election converting his partnership items to nonpartnership items within 45 days of receiving the FPAA.
We would then have one year to issue a converted item notice of deficiency.

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As a policy matter we always want to make sure taxpayers receive actual notice.