CCA 1337016: Advice on waiving notice of adjustment rights in a TEFRA matter

Plain-English summary

Chief Counsel advised on settlement language for nonpartnership items connected to a separate TEFRA proceeding involving partnership items. The advice explains when “Munro language” is used to preserve the ability to assess tax bracket creep through a later computational adjustment. It distinguishes a notice of deficiency proceeding from a notice of adjustment proceeding under IRC § 6234(g). It states that IRC § 6224(b) supplies the authority for a waiver and should be specifically cited in the settlement document.

Ruling snapshot

• Question: What language and authority should be used when settling nonpartnership items and waiving notice of adjustment rights?
• Outcome: Advice given.
• Key authorities: IRC §§ 6224(b) and 6234(g).

Full text (IRS public release)

ID: CCA_2013081511355801

Third Party Communication: None

UILC: 6224.01-00

Date of Communication: Not Applicable

Number: 201337016
Release Date: 9/13/2013

From:
Sent: Thursday, August 15, 2013 11:35:58 AM
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Subject: RE: Waiver of Notice of Adjustment

The Munro language is used when settling nonpartnership items were we are forgoing the assessment
of tax bracket creep for the nonpartnership items that would otherwise be assessed as a result of
ignoring partnership items that are subject to a separate ongoing TEFRA proceeding. We use the Munro
language when we assume the correctness of the partnership items in this situation, rather than
ignoring them. The waiver allows us to assess any forgone bracket creep for the nonpartnership items
as part of any later computational adjustment.

Instead of a notice of deficiency proceeding, I assume that you have a notice of adjustment proceeding,
where we are determining nonpartnership items that do not currently result in an assessment. If such a
notice is issued and is decided by the court, or is defaulted, section 6234(g) allows the notice of
adjustment items to be assessed as part of a later computational adjustment without any special Munro
type language being stipulated to.

If we are settling the adjusted nonpartnership items rather than issuing a notice of adjustment, just copy
the language from section 6234(g), modifying it to reflect a determination by settlement rather than
through a notice of adjustment or court determination. This will allow us to include the settled
nonpartnership items as part of any later computational adjustment. I.R.C. 6224(b) is the authority for
the waiver and should be specifically referenced in the settlement document.