CCA 200948055: A TEFRA consent can extend the period for affected-item proceedings

Plain-English summary

This Chief Counsel Advice discusses when the IRS may issue an affected-item FPAA to a taxpayer in a TEFRA proceeding. Counsel states that the FPAA for C cannot be issued until the proceeding for A is complete, and that a Form 872-P signed by A's TMP extends the limitations period for affected items, including C's affected-item FPAA. The advice explains that partnership items under IRC § 705 determine C's basis in A, while the character of A's liabilities determines C's amount at risk. If A's proceeding is complete, or the IRS accepts A's partnership items as reported, a TEFRA proceeding may be conducted only for C with the proposed consent.

Ruling snapshot

• Question: When may the IRS conduct an affected-item TEFRA proceeding for C, and what effect does A's Form 872-P have?
• Outcome: Advice given
• Key authorities: IRC §§ 465 and 705; Form 872-P; TEFRA procedures

Full text (IRS public release)

ID: CCA-848550-08 Number: 200948055
Release Date: 11/27/2009
Office:
UILC: 6229.00-00

From: -------------------
Sent: Monday, August 04, 2008 8:55 AM
To: ----------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: TEFRA Question - please see if you agree with my analysis

We can't issue the affected item FPAA to C until after the proceeding for A is complete. Any 872-P signed by the TMP of A will extend the statute for issuing affected items including the affected item FPAA to C. The partnership items under section 705 that control C's basis in A, and the character of any liabilities of A which determine C's at risk amount, are determined in the C proceeding. So generally we are better off with an unrestricted 872-P from A.

If the proceeding for A is already over, or we are not going to open a proceeding for A because we accept all of A's partnership items as reported for purposes of computing C's basis and at risk, then we can conduct a TEFRA proceeding only for C with the consent you propose.

-------------------------------------------------------------------------------------------------------------------------- I don't think that the at risk provisions (under section 465) have any effect on basis under section 705.