CCA 200913036: A return listing a disregarded entity as a second partner invoked TEFRA

Plain-English summary

Chief Counsel considered whether a purported partnership return triggered TEFRA under section 6233. A Form 1065 listing only one partner might not qualify because section 761 defines a partnership as involving more than one person, so the return's contents may control over its label. The return at issue, however, included two Schedules K-1, one for a disregarded entity owned by the other partner. Because its contents showed two partners, the advice concludes that section 6233 appeared to apply and that listing the disregarded entity as a partner made TEFRA applicable under Revenue Ruling 2004-88.

Ruling snapshot

• Question: Did a Form 1065 listing an owner and that owner's disregarded entity as two partners invoke TEFRA?
• Outcome: Advice given: section 6233 appeared to apply because the return's contents showed two partners.
• Key authorities: IRC §§ 761, 6231(g), 6233; Rev. Rul. 2004-88.

Full text (IRS public release)

ID: CCA-911102-08 Number: 200913036
Release Date: 3/27/2009
Office: --------------
UILC: 6233.00-00

From: -------------------
Sent: Thu 9/11/2008 10:21 AM
To: ------------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: TEFRA Advisors

If a Form 1065 has only one Schedule k-1 showing only one partner, this may not constitute a "partnership return" invoking section 6233. Since, by definition under section 761, a "partnership" constitutes more that one person, a return showing only one owner may not constitute a "partnership" return even though it is labeled as such. In other words, the contents of the return rather than the label may control.

My understanding, however, is that the return in this case in fact had two Schedules K-1, one for a DE owned by the other partner. Section 6233 would seem to apply in that circumstance since the contents of the return show two partners. Under Rev. Rule 2004-88, the reporting of a DE as a partner makes TEFRA apply. See also I.R.C 6231(g).

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