Partnership losses are computational adjustments, but sham-related fees need partner-level action

Plain-English summary

Chief Counsel addressed the procedural treatment of losses and professional fees after a partnership-level examination. Disallowing capital and ordinary losses reported by the partnership is a computational adjustment that does not require separate partner-level determinations, and the same treatment applies to carryovers of those losses. If the partnership was determined to be a sham, however, professional fees are affected items that likely require a separate affected-item statutory notice of deficiency.

Ruling snapshot

• Question: Which adjustments can be made computationally, and which require a partner-level affected-item notice?
• Outcome: Advice given: partnership losses and carryovers are computational, while sham-related professional fees likely require a separate notice.
• Key authorities: IRC § 6231; Bedrosian v. Commissioner, 144 T.C. 152 (2015); Domulewicz v. Commissioner, T.C. Memo. 2010-77

Full text (IRS public release)

ID:          CCA_2016030108405707
UILC:        6231.05-00

Number: 201614034
Release Date: 4/1/2016
From:
Sent: Tuesday, March 01, 2016 8:40:57 AM
To:
Cc:
Bcc:
Subject: RE: TEFRA question


HI -------,

I agree about the disallowance of the capital losses and ordinary losses reported by the
partnership being computational adjustments that do not require partner level
determinations. This includes any carryovers of those amounts.

I also agree that, if the partnership was determined to be a sham, the professional fees
are affected items likely requiring an affected item SND. Bedrosian v. Comm’r, 144 T.C.
152, 159-61 (2015); Domulewicz v. Comm’r, T.C. Memo. 2010-77.


Thanks,
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