Ezel / IRS Rulings / 201004035

Partnership-level and partner-level treatment of flow-through losses

Number
201004035
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Tax Treatment Determined At Partnership Level
Topics
Procedure, penalties, and administration
Code sections
§ 469, § 6221
Ruling dated
December 29, 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.

Currency note: this determination was released in 2010
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
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 how to challenge a flow-through loss from a tier-one partnership and a loss involving an affected item under IRC § 469. The advice states that the tier-one flow-through loss is a partnership item that can be disallowed only through an FPAA issued to that partnership. It states that whether an actual working interest exists is a partnership-level component, while the ultimate loss disallowance occurs at the partner level through a notice of deficiency after the partnership proceeding ends.

Ruling snapshot

  • Question: Which parts of a flow-through loss and an IRC § 469 loss must be addressed at the partnership level?
  • Outcome: Advice given.
  • Key authorities: IRC §§ 469 and 6221; Sente Investment Club v. Commissioner, 95 T.C. 243 (1990); Estate of Quick v. Commissioner.

Full text (IRS public release)

ID: CCA_2009122910561037 Number: 201004035
Release Date: 1/29/2010
Office: ----------
UILC: 6221.00-00

From: -------------------
Sent: Tuesday, December 29, 2009 10:56:16 AM
To: ---------------------
Cc:
Subject: RE: Partnership vs. non-partnership question #2

  1. The flow through loss from tier one is a partnership item of tier one that can only be disallowed by
    issuing an FPAA to tier one. Sente Investment Club v. Commissioner, 95 T.C. 243 (1990).

  2. Section 469 is an affected item with both partnership item and partner level components. See Estate
    of Quick v. Commissioner. A partnership item component would be whether an actual working interest exists. If we are challenging this aspect, we would have to do so through an FPAA. The ultimate disallowance of the loss occurs at the partner level through an affected item notice of deficiency issued after the partnership proceeding is complete.

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