CCA 1319014: TEFRA classification is generally determined at audit start

Plain-English summary

Chief Counsel Advice considers whether the IRS may continue relying on a partnership return after learning facts that appear contrary to the return's treatment under IRC § 6231(g)(2). The advice says the point when reliance is no longer justified has not been directly addressed by the courts. It notes that courts had held, before section 6231(g)(2), that the TEFRA or non-TEFRA determination is made at the beginning of the audit and does not change based on audit results. The advice suggests section 6231(g)(2) may have codified those holdings.

Ruling snapshot

• Question: When is a partnership's TEFRA or non-TEFRA status determined for audit purposes?
• Outcome: Advice given.
• Key authorities: IRC § 6231(g)(2); Harrell v. Commissioner, 91 T.C. 242 (1988); Nehrlich v. Commissioner, 2009 WL 1284067 (9th Cir. 2009); Doe v. Commissioner, 116 F.3d 1489 (10th Cir. 1997)

Full text (IRS public release)

ID: CCA_2013041208485901 Number: 201319014
Release Date: 5/10/2013
UILC: 6231.01-01

From:
Sent: Friday, April 12, 2013 8:48:59 AM
To:
Cc:
Bcc:
Subject: RE: 6231(g)

I don’t think we can reasonably rely on the return if we are aware of contrary facts. But
the point in time that our reliance is no longer justified making section 6231(g)(2)
inapplicable has never been directly addressed by the courts. The same issue was
addressed, however, before section 6231(g)(2) came into existence and the courts have
held that the TEFRA/ non-TEFRA determination is made at the beginning of the audit and
does not change based on the audit results. Harrell v. Commissioner, 91 T.C. 242
(1988); Nehrlich v. Commissioner, 2009 WL 1284067 (9th Cir. 2009); Doe v.
Commissioner, 116 F.3d 1489 (10th Cir. 1997). Section 6231(g)(2) may have been
intended to codify these court holdings.