Affected items can arise from partnership items as reported or changed

Plain-English summary

Chief Counsel Advice explained that affected items can be affected by partnership items either as reported or as changed at the partnership level. The advice stated that the partnership items do not need to change for affected items to exist. After a no-change FPAA is resolved, the IRS can issue affected-item notices of deficiency for partner-level limitations such as those under IRC §§ 465, 704(d), and 469. The partnership-level components remain binding, while partner-level issues are decided in the affected-item proceeding.

Ruling snapshot

• Question: How are affected items handled after partnership-level proceedings?
• Outcome: advice given
• Key authorities: IRC §§ 465, 469, 704(d), and 6231; Roberts v. Commissioner, 94 T.C. 853, 860 (1990)

Full text (IRS public release)

ID: CCA_2010012810222237 Number: 201011012
Release Date: 3/19/2010
Office: ----------
UILC: 6231.05-00

From: -------------------
Sent: Thursday, January 28, 2010 10:22:28 AM
To: ----------------------
Cc: -----------
Subject: RE: Tefra question

Affected items are affected by partnership items either as reported or changed at the partnership level. You don't need to change partnership items to have affected items. See, e.g., Roberts v. Commissioner, 94 T.C. 853 at 860 (1990).

After we issue a no change FPAA which either defaults of is petitioned and decided, we can issue affected item notices of deficiency for partner-level limitation issues such as 465, 704(d) or 469. We will be bound by the partnership level components of these issues either as reported on the partnership return or as redetermined at the partnership level. Only the partner-level issues, such as whether the partner worked the minimum hours to meet material participation requirement, would be determined in the affected item proceeding. The latest partnership audit guide in the IRM goes into these issues in detail.