CCA 201016079: Partnership returns may support a reasonable TEFRA determination, and nominees must identify true owners

Plain-English summary

Chief Counsel Advice addresses whether the IRS may rely on a partnership return to determine whether the TEFRA partnership procedures apply. The advice says that reliance is permitted when reasonable, but contradictory facts known to the IRS may make reliance on the return unreasonable and may require duplicate procedures. It also states that a partnership must send Schedule K-1 forms to a nominee unless the nominee has disclosed the true owner for whom it holds the partnership interest.

Ruling snapshot

• Question: When may the IRS rely on a partnership return to determine whether TEFRA applies, and when must a partnership send a Schedule K-1 to a nominee?
• Outcome: Advice given
• Key authorities: IRC §§ 6031 and 6231(g); Treas. Reg. § 1.6031(b)-1T(a)(2)

Full text (IRS public release)

ID: CCA_2010033108412037 Number: 201016079
Release Date: 4/23/2010
Office: ----------
UILC: 6031.04-01

From: -------------------
Sent: Wednesday, March 31, 2010 8:41:26 AM
To: -------------------
Cc: ------------------------------------
Subject: RE: TEFRA vs non-TEFRA

Section 6231(g) allows us to rely on the partnership return to determine whether TEFRA applies but only if such reliance is reasonable. If we are aware of contradicting facts, our reliance on the return may not be considered reasonable. So we may have to follow duplicate procedures.

The regulations under Treas. Reg. 1.6031(b)-1T(a)(2) require the partnership to send Forms K-1 to the nominee unless the nominee has disclosed the true owner on whose behalf it holds the interest.