Selecting a tax matters partner after entity partners dissolved

Plain-English summary

Chief Counsel advised an examination team handling a TEFRA partnership proceeding whose general partners were entities that had dissolved. The two indirect partners with interests in the proceeding could sign limitation extensions and powers of attorney because they were parties to the administrative proceeding. The IRS could select the proposed partner as tax matters partner, with a trustee acting for a trust, if the regulatory procedures were followed. Because the ordinary selection rule was impracticable after all general partners were treated as having no profits interests, the Commissioner could select a general or limited partner who was a partner at the close of the year under examination and provide the required notice.

Ruling snapshot

• Question: How to extend limitation periods, recognize powers of attorney, and select a tax matters partner after entity general partners dissolved
• Outcome: Advice given on extensions, representation, selection criteria, and notice
• Key authorities: Treas. Reg. § 301.6231(a)(7)-1

Full text (IRS public release)

ID:       CCA_2015090413473415
UILC:     6231.07-00

Number: 201543018
Release Date: 10/23/2015
From:
Sent: Friday, September 04, 2015 1:47:34 PM
To:
Cc:
Bcc:
Subject: RE: TEFRA TMP & POA questions - ----------------------


Hello,

   Based on the facts of this case, we recommend Exam get Forms 872 from both -------
------------------------------------------------------to extend their individual periods of limitations
to assess tax or file claims for refund as they are the only two taxpayers with any
interests in this proceeding. Furthermore, since they are indirect partners of the
partnerships at issue, they are parties to the administrative proceeding and so may sign
POAs allowing Exam to discuss the matter with any such person appointed POA.

   Also based on the facts as presented, ---------------------------------------------------- may
be selected as TMP with ------------------- able to act on the Trust’s behalf as trustee, so
long as such selection is in accordance with the procedures under Treas. Reg.
301.6231(a)(7)-1 .

   According to the facts, all general partners of the partnerships at issue are entities
and all such entities have dissolved. Also under the facts, the Service is required to
determine the TMP under Treas. Reg. 301.6231(a)(7)-1(m) as either the partnerships
did not properly designate a TMP (by not designating a general partner as TMP) or
properly designated a TMP, but such designation terminated under Treas. Reg.
301.6231 (a)(7)-1(l)(1) due to the liquidation or dissolution of the then designated
TMP. Treas. Reg. 301.6231 (a)(7)-1(l)(1)(iii).

    However, under Treas. Reg. 301(a)(7)-1(o), it is impracticable to apply the rule under
Treas. Reg. 301.6231 (a)(7)-1(m)(2) since all general partners are deemed to have no
profits interest because of liquidation or dissolution. Treas. Reg. 301.6231 (a)(7)-
1(o)(2). Treas Reg. 301.6231 (a)(7)-1(p)(2) states that if it is impracticable under
Treas. Reg. 301.6231 (a)(7)-1(o)(2), the Commissioner will select a partner (including a
general or limited partner) as the TMP in accordance with Treas. Reg. 301.6231 (a)(7)-
1(q). The Commissioner then needs to notify, within 30 days of the selection, the
partner selected, the partnership, and all notice partners of the selection of the TMP,
effective as of the date specified in the notice. Treas. Reg. 301.6231 (a)(7)-1(p)(2).

                                           2

    Treas. Reg. 301.6231 (a)(7)-1(q)(1) states that the Commissioner will only select a
partner as the TMP if the partner was a partner in the partnership at the close of the
taxable year under examination. Treas. Reg. 301.6231 (a)(7)-1(q)(2) provides criteria
the Commissioner may follow in selecting a partner as the TMP. Under such criteria, it
is recommended the Service obtain the views of any partners with regard to who the
Commissioner is considering to select as TMP, but obtaining such views are not
required.

   Please let us know if you have any additional questions.

   Sincerely,
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