Partnership-level adjustments belonged in the FPAA

Plain-English summary

Chief Counsel advised that the Service intended to issue a no-change Final Partnership Administrative Adjustment for a redacted partnership and tax year. An affected item report addressed a partner's unreported taxable gain and stated that certain determinations about a personal note, partnership liabilities, and a contribution amount were adjustments to partnership items that belonged in the FPAA. The advice further stated that any penalty related to those determinations should also be included in the FPAA.

Ruling snapshot

• Question: Which determinations and related penalties belonged in the partnership-level FPAA?
• Outcome: Advice given.
• Key authorities: IRC §§ 6221 and 6231; Treas. Reg. §§ 301.6231(a)(3)-1(a)(1)(v) and 301.6231(a)(3)-1(c)(2)(ii).

Full text (IRS public release)

ID: CCA_2009030312070654 Number: 200938025
Release Date: 9/18/2009
Office: --------------
UILC: 6231.03-00

From: --------------------------
Sent: Tuesday, March 03, 2009 12:07:08 PM
To: ----------------
Cc: --------------------
Subject: Partnership Items

------

The Service has drafted, and intends to issue to the tax matters partner of ------------------
-----------------------------------------, a “no-change” Final Partnership Administrative Adjustment (“FPAA”) for tax year -------.

The Service has also drafted an Affected Item Report, which provides in relevant part that the -----------------------------------------, a partner in the --------- partnership, has unreported taxable gain for tax year ------- because ---------- incorrectly calculated its outside basis in --------- as --------------dollars rather than -------------------. The report provides the following determinations: an --------------------------------dollar personal note was not a partnership liability assumed by ----------; and, ---------- contributed to ------------
-------------------, not -----------------dollars.

Those determinations, regarding the amount contributed to --------- and the liabilities of -
---------, are adjustments to partnership items that should be included in the FPAA regardless of whether any changes to ----------- Form 1065 are necessary. Treas. Reg.
§§ 301.6231(a)(3)-1(a)(1)(v) and -1(c)(2)(ii); Nussdorf v. Comm’r, 129 T.C. 30, 42-44 (2007); Dakotah Hills Office Ltd. Partnership v. Comm’r, T.C. Memo. 1996-35, 1996 WL 33211, 11-12; and, University Heights at Hamilton Corp. v. Comm’r, 97 T.C. 278, 280- 281 (1991).

------------------------------------------------------------------------------------------------------ If the Service applies a penalty related to the above-referenced determinations, then application of the penalty should also be included in the FPAA. I.R.C. § 6221.

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