CCA 200928033: Partners may claim a refund for income duplicated after a TEFRA settlement

Plain-English summary

Chief Counsel advised that taxpayers had two years after signing Form 870-LT to claim a refund. Their settlement fixed the amount of partnership income, but the later computational adjustment allegedly failed to remove the same income that had also been reported on Schedule C. Removing genuinely duplicated Schedule C income would not conflict with the settlement. The taxpayers' earlier failure to raise the duplication did not invalidate Form 870-LT because that omission was not fraud, malfeasance, or a misrepresentation of fact under section 6224(c).

Ruling snapshot

• Question: May taxpayers seek a refund when a computational adjustment double-counted partnership income also reported on Schedule C?
• Outcome: Advice given that a timely refund claim may remove genuinely duplicated income
• Key authorities: IRC §§ 6224(c), 6230(c)(2)(B)(i)

Full text (IRS public release)

ID: CCA_2009052711232637 Number: 200928033

Release Date: 7/10/2009

Office: -------------

UILC: 6224.01-01

From: --------------------

Sent: Wednesday, May 27, 2009 11:23:27 AM

To: -------------------

Cc: ------------------------------------------------------------

Subject: RE: TEFRA audit reconsideration

Taxpayers have 2 years from the date the Form 870-LT was signed to file a refund claim. I.R.C. 6230(c)(2)(B)(i). The refund claim would be based on the fact that the Form 870-LT determined the amount of partnership income with finality and that the computational adjustment/assessment failed to back out the double reporting of that same income reported as Schedule C income. Backing out the Schedule C income would not be inconsistent with the Form 870-LT if the Schedule C truly duplicated the determined partnership income. The fact that taxpayers failed to raise this issue does not invalidate the Form 870-LT since the failure does not constitute fraud, malfeasance or misrepresentation of fact within the meaning of section 6224(c).

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