Adjusting partnership years and partner credit carryforwards

Plain-English summary

The Chief Counsel advice addresses TEFRA adjustments for partnership years that may be closed or open under the period-of-limitations rules. It states that each partnership year is a separate cause of action, so the IRS may adjust a partnership year regardless of how earlier or later years were reported. If a resulting credit is carried forward by the partners, the IRS may issue an FPAA for the carryforward year while that year remains open. The advice also addresses an FPAA for a partnership year in which the partnership improperly carried a credit forward at the partnership level.

Ruling snapshot

• Question: May the IRS make TEFRA adjustments for a partnership year and issue FPAAs for open partner or partnership carryforward years?
• Outcome: Advice given
• Key authorities: IRC § 6229

Full text (IRS public release)

ID: CCA_2013080715501801 Third Party Communication: None

UILC: 6229.00-00
Date of Communication: Not Applicable

Number: 201402007
Release Date: 1/10/2014
From:
Sent: Wednesday, August 07, 2013 3:50:19 PM
To:
Cc:
Bcc:
Subject: RE: TEFRA Adjustments arising in closed years....

Each year is a separate cause of action and we are free to adjust that partnership year regardless of how prior or later years were reported.

But the credit here would be carried forward by the partners, not the partnership. So we would have to issue an FPAA for -------in order to prevent the partners from carrying the loss forward from ------ to their later years. We can do so as long as the partners’ carryforward year is open. We did so in Kligfeld v. Commissioner, 128 T.C. 192 and G-5 Holding v. Commissioner, 128 T.C. 186.

We would also have to issue an FPAA for the ------ partnership year if the partnership improperly carried forward a credit at the partnership level.