CCA 201210037: IRS explains computational adjustments in TEFRA cases

Plain-English summary

Chief Counsel advice explains that a computational adjustment is a change in a partner's tax liability under IRC § 6231(a)(6). It may be directly assessed when it is purely a mathematical computation, or assessed through a notice of deficiency when partner-level factual determinations are required. The advice also states that a computational adjustment is not limited to amounts that are directly assessed. If the taxpayer agrees and signs a waiver, the item is also an agreed affected item, and the agent may assess without deciding whether further factual determinations are needed.

Ruling snapshot

• Question: When may a TEFRA computational adjustment be assessed directly, and what is the effect of a taxpayer's waiver?
• Outcome: Advice given.
• Key authorities: IRC § 6231(a)(6).

Full text (IRS public release)

ID: CCA_2012020311241237 Number: 201210037
Release Date: 3/9/2012
Office: ----------
UILC: 6231.06-00

From: --------------------
Sent: Friday, February 03, 2012 11:24:19 AM
To: ----------------------
Cc:
Subject: RE: TEFRA Issues ---------

I am not sure what your question is. A "computational adjustment" is the change in a partner's tax liability. I.R.C. 6231(a)(6). A computational adjustment can be either directly assessed (if its purely a math computation) or assessed through a notice of deficiency if further factual determinations are required. "Computational adjustment" does not mean an amount that is directly assessed, even though people commonly refer to it as such.

If the taxpayer agrees to the assessment and signs a waiver, it is also an agreed affected item.

If the partner signs a waiver, the agent does not need to determine whether factual determinations are required or not. We can simply assess. If no waiver is signed, then we can directly assess only if the assessment is purely a math computation with no partner-level factual determinations required.