CCA 200913031: Unreported inconsistency allowed direct assessment of a partnership deduction

Plain-English summary

Chief Counsel addressed expenses that a partner paid on behalf of a partnership. Ordinarily, the payment is treated as a cash contribution followed by a partnership expenditure, and the deduction must appear on the partnership return and the partner's Schedule K-1. If the partner instead reported the item inconsistently without filing Form 8082, section 6222 allowed the IRS to assess the discrepancy directly. The advice notes a possible exception under non-TEFRA case law when the partnership agreement specifically makes the expense directly deductible by the partner.

Ruling snapshot

• Question: Could the IRS directly assess a partner who deducted a partnership expense inconsistently with Schedule K-1 without filing Form 8082?
• Outcome: Advice given: direct assessment was available under section 6222, subject to a possible agreement-based exception.
• Key authorities: IRC § 6222; Form 8082 inconsistent-filing notice.

Full text (IRS public release)

ID: CCA-878470-08 Number: 200913031
Release Date: 3/27/2009
Office: --------------
UILC: 6222.03-00

From: -------------------
Sent: Thu 8/7/2008 8:47 AM
To: ---------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: TEFRA Question

Partnership expenses paid by a partner on behalf of a partnership are the deductions of the partnership which are shared among the partners in accordance with the partnership agreement - the partner acts as the partnership agent in this respect. In effect, there is a deemed contribution of cash to the partnership followed by an expenditure of the partnership. Both the cash contribution and expenditure should be reflected on the partnership return. Because it would be a deduction of the partnership, it must be reported on the Form 1065 and Schedule K-1. If the partner reported inconsistently with his Schedule K- 1, and did not file a Form 8082 Notice of Inconsistent Filing, we can directly assess the discrepancy under section 6222.

There is some case law (non-TEFRA) which would treat the expense as a direct expense of the partner separately deductible by him, if the partnership agreement specifically provides for this treatment -----------
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