FPAA treatment of tier-partner gain and withholding issues

Number

201004030

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Definitions and Special Rules

Topics

Procedure, penalties, and administration

Code sections

§ 6231, § 1446

Ruling dated

October 22, 2009

Publicly released

January 29, 2010

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2010, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice addresses TEFRA treatment of a capital-gain reporting failure, related penalties, and withholding by a TEFRA LLC. It states that the gain and related penalties would be addressed in an FPAA to the tier partner, while the § 1446 withholding issue and entity-level penalties would be partnership items recorded in the relevant remarks section and explained by an examination report. It also states that without a prior FPAA to the key-case entity, the Service is bound by that entity's partnership items, including the tier partner's outside-basis components used to calculate gain at the partner level.

Ruling snapshot

Question: How should gain, penalties, and § 1446 withholding be treated in a TEFRA partnership examination?
Outcome: Advice given.
Key authorities: IRC §§ 6231 and 1446.

Full text (IRS public release)

ID: CCA_2009102214140654 Number: 201004030
Release Date: 1/29/2010
Office: --------------
UILC: 6231.00-00

From: --------------------------
Sent: Thursday, October 22, 2009 2:14:09 PM
To: -----------------------------------------
Cc: --------------------
Subject: RE: TEFRA Penalties on Withholding Issue

We agree with your analysis in the below e-mail message: the failure to report capital gain and the related penalties would be addressed in an FPAA to the tier partner. We would add only that, without a prior FPAA to the key case entity, the Service will be bound by the partnership items of the key case entity, including the components of the tier partner's outside basis utilized in calculating the gain at the partner level.

From:
Sent: Thursday October 22, 2009 6:48 AM
To:
Cc:
Subject: RE: TEFRA Penalties on Withholding Issue

The 1446 withholding issue for the TEFRA LLC would be a partnership item and would go on the 4605-A in the remarks section. You’d use a narrative format and reference an 886-A which would explain the tax, law, argument, etc. If you are applying penalties at the TEFRA entity-level, they too would be a paragraph in the remarks section and reference an 886-A for the penalties.

If this goes unagreed and FPAAs are issued, both of these partnership items would be reflected in the FPAA.

Hope this helped. Please get back to me if I can be of further assistance.

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