CCA 1036023: Assessment extension for partnership items also covers affected items

Plain-English summary

Chief Counsel advice addressed whether an agreement extending the assessment period for partnership-level items also covered gain from the sale of a partnership interest. The advice states that partnership items under IRC § 705 affect the partner's outside basis and therefore the gain on sale. Under IRC § 6229, an extension for tax attributable to partnership items also extends the period for affected items. The advice concluded that the IRS would have one year after the partnership proceeding ended to issue an affected-item notice of deficiency under IRC § 6230(a)(2)(A)(i).

Ruling snapshot

• Question: Does an assessment-period extension for partnership items also extend the period for related affected items?
• Outcome: Advice given
• Key authorities: IRC §§ 705, 6229, and 6230

Full text (IRS public release)

ID: CCA_2010063014582037 Number: 201036023
Release Date: 9/10/2010
Office: ----------
UILC: 6229.02-00

From: -------------------
Sent: Wednesday, June 30, 2010 2:58:24 PM
To: --------------------------------
Cc: -----------
Subject: RE: Local Counsel Questioning SOL

  I don't see the limitation you referred to below in the extension agreement: "to
  determine the gain at the partnership level"

  There no question that gain on the sale of a partnership interest is an
  affected item affected by the partnership items listed in section 705
  that make up the partner's basis in his partnership interest. Any
  determination of the partnership items listed in section 705 will affect the
  partner's outside basis and, thus, the partner's gain on the sale of his
  partnership interest. See, e.g., Desmet v. Commissioner. Under section 6229,
  any extension of the period for assessing tax attributable to partnership items
  also extends the period for assessing affected items. See, e.g., Ginsburg v.
  Commissioner. Thus, you will have one year following the completion of the
  partnership proceeding to issue an affected item notice of deficiency under
  section 6230(a)(2)(A)(i) redetermining the gain on the sale of the partnership
  interest.