Counsel distinguishes partnership-level and partner-level TEFRA agreements

Plain-English summary

This Chief Counsel Advice compares Forms 870-PT and 870-LT, which are TEFRA forms used to resolve tax matters involving partnerships and partners. It states that Form 870-PT resolves partnership-level determinations of partnership items and related penalties, but not partner-level defenses or affected items. Part I of Form 870-LT is equivalent to Form 870-PT, while Part II is a separate legal agreement covering partner-level defenses and affected items. The advice says that a closing agreement should be used when future tax years are also involved.

Ruling snapshot

• Question: How do Forms 870-PT and 870-LT differ, and when should a closing agreement be used?
• Outcome: Advice given
• Key authorities: IRC § 6224

Full text (IRS public release)

ID: CCA_2010042209124837 Number: 201021023
Release Date: 5/28/2010
Office: ----------
UILC: 6224.01-01

From: -------------------
Sent: Thursday, April 22, 2010 9:12:55 AM
To: ----------------------
Cc: -----------
Subject: RE: 870 PTAD or 870 LTAD

  These TEFRA forms are the equivalent of closing agreements. The Form 870-PT
  resolves the partnership-level determination of partnership items and related
  penalties, but does not resolve partner-level defenses to penalties and affected
  items.

  Part I of the Form 870-LT is equivalent to the Form 870-PT. Part II of the Form 870-
  LT, however, constitutes a separately executed legal agreement as to the treatment
  of partner-level defenses to penalties and affected items.

  These forms are designed for use for a specific taxable year. If future years are also
  involved (e.g., future use of basis), a closing agreement should be used instead.