Counsel addresses inconsistent partnership allocations through tier partnerships

Plain-English summary

Chief Counsel addressed inconsistent allocations between a source partnership and a tier partnership. The advice states that IRC § 6222 permits assessment of an inconsistently reported item when the source partnership reports one allocation and the tier partnership reports another without filing Form 8082. It also states that if a TEFRA proceeding increases the source partnership's income and the tier partnership reported less than the resulting allocation, the increase may be directly assessed. On the described facts, an affected-item FPAA or statutory notice should not be necessary if the income amount and source are undisputed and the tier partnership's reported allocation percentage is used.

Ruling snapshot

• Question: Could inconsistently reported partnership items be directly assessed through a tier partnership without an affected-item FPAA or statutory notice?
• Outcome: Advice given
• Key authorities: IRC § 6222; Form 8082

Full text (IRS public release)

ID: CCA_2010120310343537 Number: 201103053
Release Date: 1/21/2011
Office: ----------
UILC: 6230.01-00

From: -------------------
Sent: Friday, December 03, 2010 10:34:38 AM
To: --------------------
Cc: -----------
Subject: RE: 12/08/10 K-1 discrepancy

If a source partnership files a return showing that $100 should be allocated to tier partnership and tier partnership files a return reflecting $90 (and failed to file a Form 8082 Notice of Inconsistent Treatment) then section 6222 says that we can assess the inconsistently reported item. If a TEFRA partnership proceeding for source partnership increases the amount of partnership income, and the allocation to tier thus increases to $120, that could also be directly assessed if the tier reported less than $120. You are correct that an affected item FPAA to the tier, or an affected item stat notice to the ultimate investor, should not be necessary if there is no issue as to the amount and source of the income flowing through and we are using the tier partnership's reported allocable percentage to its partners to flow the adjustments through to the indirect partners.