IRS may rely on partnership return in applying TEFRA procedures

Plain-English summary

Chief Counsel advised that TEFRA partnership procedures applied when a partnership's Form 1065 listed a flow-through entity as a partner. IRC § 6231(g) allows the IRS to rely on the partnership return when reasonably determining whether TEFRA applies. That result remains in place even if the IRS later learns that the return was filed incorrectly and that TEFRA would not have applied to a correctly filed return.

Ruling snapshot

• Question: Could the IRS rely on a filed partnership return to apply TEFRA procedures when the return incorrectly listed a flow-through partner?
• Outcome: Advice given
• Key authorities: IRC § 6231(g)

Full text (IRS public release)

ID: CCA_2015111308384707 [Third Party Communication:

UILC: 6231.01-01, 6231.09-00, 6231.00- Date of Communication: Month DD, YYYY]

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Number: 201550040
Release Date: 12/11/2015
From:
Sent: Friday, November 13, 2015 8:38:47 AM
To:
Cc:

Bcc:
Subject: RE:

Hi -----,

Based on the facts you have presented, I believe TEFRA applies. Section 6231(g) states that if, on the basis of a partnership return, the IRS reasonably determines that TEFRA applies, then TEFRA will apply even if that determination is later determined to be erroneous. If a partnership files a Form 1065 for the entire year listing a flow-thru entity as one of its partners, TEFRA applies and the IRS may reasonably rely on the return filed by the partnership for the year in applying the TEFRA procedures even if the IRS subsequently discovers that the partnership should not have filed the return the way it did and, if the partnership had filed correctly for the year, TEFRA would not apply.

Thanks,
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