CCA 201125038: Signed Form 870-LT binds the taxpayer on affected items

Plain-English summary

Chief Counsel advised that a taxpayer who signed Part II of Form 870-LT is bound by the determinations in that part concerning affected items. If the attached adjustment schedule reflects loss reductions based on affected items, the advice states that those losses are conclusively determined under the applicable limitations. It also says that Part II is binding under sections 7121 and 6224(c), with the same effect as a closing agreement, and that the IRS has no discretion to abate paid amounts under section 6404(a).

Ruling snapshot

• Question: What effect does a signed Part II of Form 870-LT have on affected-item determinations and paid amounts?
• Outcome: Advice given.
• Key authorities: IRC §§ 6224(c), 7121, and 6404(a); Form 870-LT; H-Graphics v. Commissioner, T.C. Memo. 1992-345.

Full text (IRS public release)

ID: CCA_2011060310542037 Number: 201125038
Release Date: 6/24/2011
Office: ---------
UILC: 6224.01-01

From: --------------------
Sent: Friday, June 03, 2011 10:54:27 AM
To: -----------------
Cc: --------------------------------------
Subject: RE: TEFRA partner case

Since the taxpayer signed Part II of the Form 870-LT, he is bound to the determinations in that part as to affected items. If the attached schedule of adjustments reflects a reduction of the losses based on affected items, the losses are conclusively determined based on these limitations. Part II of the Form 870-LT specifically states that it is binding under bother section 7121 and 6224(c). Thus, it has the same binding effect as a closing agreement. See H-Graphics v. Commissioner, T.C. Memo. 1992-345. Nor do we have discretion to abate any paid amounts under section 6404(a).