Ezel / IRS Rulings / 1123033
Chief Counsel Advice 1123033 Released June 10, 2011 Advice

CCA 1123033: Partnership-level negligence determination can account for innocent managers' defenses

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This page covers one taxpayer's ruling from 2011, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2011
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice addresses penalties asserted against a limited liability company treated as a partnership under the TEFRA rules. It states that the partnership appeared negligent, so the penalties should be determined at the partnership level based on the knowledge and conduct of the responsible managers. It also explains that innocent managers may be forgiven their share of the partnership-level penalty if they establish a partner-level defense, such as lack of knowledge or reasonable cause and good faith.

Ruling snapshot

  • Question: How should negligence penalties be determined when some managers of a partnership were innocent?
  • Outcome: Advice given.
  • Key authorities: IRC § 6221; Treas. Reg. § 301.6221-1(d).

Full text (IRS public release)

ID: CCA_2011051108245637 Number: 201123033
Release Date: 6/10/2011
Office: ----------
UILC: 6221.00-00

From: -------------------
Sent: Wednesday, May 11, 2011 8:25:02 AM
To: --------------------
Cc: -----------
Subject: RE: TEFRA - Penalties asserted against LLC

It appears that the partnership was negligent and that as a consequence penalties should be determined
at the partnership level based on the knowledge and behavior of the managers responsible for the
incorrect reporting. The fact that other managers were innocent can lead to their being forgiven for the
partnership-level determination of penalties based on their partner-level defenses to the penalty under
Treas. Reg. 301.6221-1(d), e.g., lack of knowledge of the incorrect treatment and reasonable cause/good
faith in claiming the items on their Schedule K-1.

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