CCA addresses partnership proceedings after insufficient income reporting

Plain-English summary

Chief Counsel Advice addressed the IRS response when a partnership did not report enough income. The IRS would issue an FPAA to increase the partnership's income and restore any basis adjustment made at the partnership level. After the partnership proceeding, the IRS could directly assess partners who had not made an election under IRC § 108(d)(6). If a partner made an improper election, the IRS would issue an affected item notice of deficiency to disallow it. The advice stated that the period under IRC § 6229(a) could support all of these proceedings.

Ruling snapshot

• Question: What proceedings may the IRS use when a partnership underreports income and partners make or claim improper section 108(d)(6) elections?
• Outcome: Advice given
• Key authorities: IRC §§ 108(d)(6) and 6229(a)

Full text (IRS public release)

ID: CCA_2012042008562437 Number: 201222037
Release Date: 6/1/2012
Office: ----------
UILC: 108.03-01

From: -------------------
Sent: Friday, April 20, 2012 8:56:35 AM
To: -------------------
Cc: -----------
Subject: RE: TEFRA non- pops question

Since the partnership did not report enough income, we would have to issue an FPAA to increase the partnership's income and restore any basis adjustment made at the partnership level. Following the partnership proceeding we would directly assess those partners who have not made a section 108(d)(6) election. If a partner has made a purported election which we think is improper, we would have to issue an affected item notice of deficiency to disallow the election.

We can rely on the period under section 6229(a) to conduct all of the above proceedings.