Ezel / IRS Rulings / 1141019
Chief Counsel Advice 1141019 Released October 14, 2011 Advice

CCA 1141019: TEFRA treatment of unreported partnership asset characterizations

Apply this to your situation

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 discusses how section 6222 applies when a partner reports an item inconsistently with a TEFRA partnership return or fails to file a notice of inconsistent treatment. It considers whether the IRS could make a computational adjustment when a partnership failed to disclose hot assets connected with the sale of a partnership interest. The advice states that a notice of deficiency may make the issue moot, but that a TEFRA partnership proceeding and an FPAA are needed to conclusively establish asset character when the partnership books and return do not do so.

Ruling snapshot

  • Question: What procedures apply when a partnership does not characterize hot assets and a partner reports inconsistently?
  • Outcome: Advice given
  • Key authorities: IRC § 6222; Roberts v. Commissioner, 94 T.C. 853, 860 (1990)

Full text (IRS public release)

ID: CCA_2011093012013337 Number: 201141019
Release Date: 10/14/2011
Office: ----------
UILC: 6222.03-00

From: -------------------
Sent: Friday, September 30, 2011 12:01:42 PM
To: ---------------------
Cc: ------------------------------------------------------------
Subject: RE: TEFRA question

Section 6222 requires a partner to file consistently with a TEFRA partnership return. If he
fails to do so, and does not file a notice of inconsistent treatment, we may make a
computational adjustment of the inconsistently reported item without issuing an FPAA. If
a partnership is required to file a Form with its partnership return disclosing "hot assets"
subject to ordinary gain treatment upon the sale of a partnership interest, but fails to do
so, it is unclear whether we could deem the partnership to have no hot assets for
purposes of a section 6222 computational adjustment.

This issue may be moot, however, to the extent we issue a notice of deficiency
recalculating gain on the sale of the partnership interest. Under Roberts v.
Commissioner, 94 T.C. 853, 860 (1990), the parties will be bound by how the partnership
books and records characterize the assets if they are not characterized on the partnership
return.

If the partnership books and records make no characterization of the assets either way,
then the only way to conclusively establish the character is to open a TEFRA partnership
proceeding and issue an FPAA to make that determination.

Get today's answer for your situation

You just read what the IRS ruled for one taxpayer in 2011, and it can't be cited as precedent. Ezel checks the current Internal Revenue Code and IRS guidance and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.