CCA 201012039: Duplicate TEFRA and non-TEFRA proceedings may be required after a partner redeems an interest

Plain-English summary

Chief Counsel Advice addressed whether an adjustment to an item that flowed from a partnership required a TEFRA proceeding after a partner redeemed an interest. The advice stated that duplicate TEFRA and non-TEFRA proceedings should be conducted. If the partnership did not file a short-year return, the taxpayers would be treated as parties to a TEFRA proceeding for the entire taxable year. The government would therefore be bound by how the partnership treated the credits before and after the redemption unless a TEFRA proceeding redetermined the amounts and treatment.

Ruling snapshot

• Question: What proceedings are required when a partner redeems an interest during a year without a short-year partnership return?
• Outcome: Advice given
• Key authorities: IRC § 6231

Full text (IRS public release)

ID: CCA_2010021715482837 Number: 201012039
Release Date: 3/26/2010
Office: ----------
UILC: 6231.03-00

From: -------------------
Sent: Wednesday, February 17, 2010 3:48:32 PM
To: -------------------
Cc: --------------------------------------------------------
Subject: RE: Does adjusting an item of a non-partner which flowed from a Partnership that would be subject to TEFRA require a TEFRA proceeding?

You should conduct duplicate TEFRA non-TEFRA proceedings. In the absence of a short year partnership return, the taxpayers will be treated as parties for a TEFRA proceeding for the entire taxable year. As such, the government will be bound by how the partnership treated the credits for both the period before the partner redeemed its interest and the period after it redeemed its interest, unless we conduct a TEFRA proceeding to redetermine the amounts and treatment by the partnership.