CCA 200914026: A trust's consent did not extend its beneficiaries' assessment periods

Plain-English summary

Chief Counsel advised on several limitations-period consents for direct and indirect partners. A trust could not extend a beneficiary's assessment period, so the IRS needed Forms 872-i from beneficiaries taxable on partnership adjustments passing through a grantor or complex trust, unless it relied on a partnership-level Form 872-P. Counsel thought a parent could probably be listed with "and subsidiaries" rather than naming every subsidiary, provided the signature showed the officer also signed for the partner-subsidiary, but deferred that point to another official. No Form 872 was needed from an S corporation unless the IRS intended to tax built-in gain under section 1374 or otherwise tax it as a C corporation. The email cited Bufferd v. Commissioner for the S corporation conclusion.

Ruling snapshot

• Question: Which limitation-extension forms were needed for trust beneficiaries, subsidiaries, and an S corporation affected by partnership adjustments?
• Outcome: Advice given: obtain or rely on consents that bind the actually taxable partners, and obtain an S corporation consent only if the corporation itself may owe tax.
• Key authorities: IRC §§ 1374 and 6229; Bufferd v. Commissioner; Forms 872, 872-P, and 872-i.

Full text (IRS public release)

ID: CCA-310159-09 Number: 200914026
Release Date: 4/3/2009
Office: --------------
UILC: 6229.02-00

From: -------------------
Sent: Mon 9/8/2008 11:15 AM
To: ------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: TEFRA

1 - 3. These look fine.

4. The trust has no power to extend the period for assessing any beneficiary. So if the trust is a grantor
   trust or is a complex trust that has distributable net income ("DNI") that will be taxable to the beneficiaries based on the partnership item adjustments, you will need to secure Forms 872-i from the beneficiaries. Alternatively, you can rely on the Form 872-P signed at the partnership level to assess the direct and indirect partners.

5. I think it is probably fine to simply list the parent "and subsidiaries" rather than naming each individual
   subsidiary. The signature line should reflect, however, that the officer is also signing as an officer of the partner-subsidiary as you indicate. This is -------- call, so I will leave this issue to ------------------------in ------
   -----.

6. You don't need a Form 872 from the S corporation unless you intend to tax it for built in gain under
   section 1374 or otherwise tax it as a C corporation. The Supreme Court so held in Bufferd v. Commissioner.