CCA 200928042: Pass-through partner can make a partnership subject to TEFRA procedures

Plain-English summary

Chief Counsel advised that there is no second procedural level when a partner is not subject to TEFRA. A partnership automatically becomes subject to TEFRA, however, if one of its partners is a pass-through entity as defined in section 6231(a)(9), including a nominee. If TEFRA applies for that reason, or because the partnership elected out of the small-partnership exception, the advice recommends duplicate procedures as the conservative approach. Without a nominee claim or TEFRA election, the adjustment most likely is non-TEFRA, and section 6231(g) can make the IRS's reasonable reliance on the partnership return dispositive.

Ruling snapshot

• Question: Should an adjustment be handled under TEFRA when a partnership may qualify for the small-partnership exception?
• Outcome: Advice given
• Key authorities: IRC § 6231(a)(9), (g); Rev. Rul. 2004-88

Full text (IRS public release)

ID: CCA_2009051914544937 Number: 200928042

Release Date: 7/10/2009

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

UILC: 6231.01-01

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

Sent: Tuesday, May 19, 2009 2:54:50 PM

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

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

Subject: RE: TEFRA Report Q

If the partner is not subject to TEFRA, no second level exists. If one of the partners' is a pass-thru entity as defined under section 6231(a)(9)(including a nominee), however, the partnership automatically becomes subject to TEFRA. See Rev. Rul 2004-88. If that is your situation, or if TEFRA applies because the partnership elected out of the small partnership exception, then I agree that we should follow duplicate procedures as the most conservative approach. If the corporation was not claimed as a nominee, however, and no TEFRA election was made, this most likely is a non-TEFRA adjustment. See also I.R.C. 6231(g)(Service's reasonable reliance on the partnership return to determine that TEFRA procedures do not apply shall be dispositive).