CCA 201312040: settled partnership items could not be reconsidered after the filing deadlines

Plain-English summary

Chief Counsel advised that the IRS could not reconsider a taxpayer's request after the partners had signed comprehensive Form 870-PT settlement agreements. The agreements were binding because they were not marked as partial agreements and contained no fraud exception applicable to the facts described. The later request for administrative adjustment was invalid because the settlements converted the partnership items to nonpartnership items, removing the partners from the applicable procedures. The IRS also could not issue a refund because the limitation periods under IRC §§ 6229(f), 6230(c)(2), and 6402 had expired.

Ruling snapshot

• Question: Could the IRS reconsider settled partnership items and issue a refund after the applicable filing periods expired?
• Outcome: Advice given, the request could not be reconsidered and no refund could be issued.
• Key authorities: IRC §§ 6224(c)(1), 6228(a)(4)(B), 6229(f), 6230(c)(2), 6226(d)(1)(A), 6231(b)(1)(C), and 6402

Full text (IRS public release)

ID: CCA_2013012410115437 Number: 201312040
Release Date: 3/22/2013
Office: ----------
UILC: 6224.01-01

From: -------------------
Sent: Thursday, January 24, 2013 10:12:28 AM
To: ---------------------------------------------
Cc: ------------------------------
Subject: RE: Request for Audit Reconsideration on a case wherer AAR filed after TEFRA Form 870-PTs are signed

We are prohibited by statute from reconsidering the taxpayer's request. First of all, the Form 870-PT is a comprehensive settlement of partnership items unless the agreement is stamped "Partial Agreement" and special limiting language is added in accordance with IRM 4.31.2.2.2.8. The partial agreement language was not added so that partners are fully bound to their settlement. I.R.C. 6224(c)(1). The agreement states that it is binding in the absence of fraud and there was none here. If the partners wanted an additiotional deduction they should have raised it during the TEFRA audit and should not have agreed to settle all partnership items.

The subsequent Request for Administrative Adjustment is invalid since the settlement agreements converted the partnership items to nonpartnership items under section 6231(b)(1)(C) removing the partners from the AAR procedures. See I.R.C. 6228(a)(4)(B) and 6226(d)(1)(A).

Section 6402 also prohibits us from issuing a refund after the period of limitations has expired. The one year period under section 6229(f) has expired and the 6 month deadline for filing a claim related to settled partnership items under section 6230(c)(2) has also expired.