CCA 200933031: TEFRA procedures required in described partnership dispute

Plain-English summary

Chief Counsel Advice addressed a partnership return filed when the small-partnership exception to TEFRA did not apply because one of the partners was a pass-through entity, or because the entity elected into the TEFRA procedures. The advice stated that the TEFRA procedures were mandatory for determining that no partnership existed. It cited section 6233(b), the applicable regulation, and several Tax Court and appellate decisions.

Ruling snapshot

• Question: Are TEFRA procedures mandatory when a filed partnership return is outside the small-partnership exception and the issue is whether a partnership existed?
• Outcome: Advice given
• Key authorities: IRC § 6233(b); Treas. Reg. § 301.6231(a)(1)-1(b); Frazell v. Commissioner, 88 T.C. 1405 (1987)

Full text (IRS public release)

ID: CCA_2009071308575237 Number: 200933031
Release Date: 8/14/2009
Office: --------------
UILC: 6233.02-00

From: -------------------
Sent: Monday, July 13, 2009 8:57:53 AM
To: ------------------
Cc: -----------
Subject: RE: Your Thoughts/Insight

If a partnership return was filed, and the small partnership exception to TEFRA would not apply because one of the several partners was a pass-thru entity (or the entity elected into the TEFRA procedures in accordance with Treas. Reg. 301.6231(a)(1)-1(b))then the TEFRA procedures are mandatory to determine that no partnership existed. I.R.C. 6233(b); Frazell v. Commissioner, 88 T.C. 1405 (1987); RJT v. Commissioner (7th Circuit opinion issued last year); Andantech v. Commissioner (D.C. Circuit). See also Petaluma v. Commissioner (recent Tax Court opinion).