Partnership-related adjustments enter imputed underpayment computation

Number

202129012

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Determination of Imputed Underpayments - BBA

Topics

Procedure, penalties, and administration

Code sections

§ 6225

Ruling dated

July 21, 2020

Publicly released

July 23, 2021

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2021, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

Chief Counsel addressed the interaction between the BBA centralized partnership audit rules and self-employment tax. It advised that every adjustment to a partnership-related item enters the imputed underpayment computation, even if the partners' correct reporting would not produce additional Chapter 1 income tax. Whether an item affects Chapter 1 instead bears on whether the item is a partnership-related item in the first place. The email also said Chief Counsel had no guidance on the interaction of the BBA rules and SECA, although the IRS's Large Business and International division had prepared internal material for agents.

Ruling snapshot

Question: Does a partnership-related-item adjustment enter the BBA imputed underpayment computation if correct partner reporting would not increase Chapter 1 tax?
Outcome: Advice given: yes, all partnership-related-item adjustments enter the computation.
Key authorities: IRC § 6225 (UILC 6225B.01-00); BBA centralized partnership audit rules

Full text (IRS public release)

ID: CCA_2020072113211443
UILC: 6225B.01-00

Number: 202129012
Release Date: 7/23/2021
From: --------------------
Sent: Tuesday, July 21, 2020 1:21:14 PM
To: ---------------------
Cc: ------------------------------------------------------------------- Bcc: Subject: RE: SECA cases - BBA

Hi ----------

All adjustments to partnership-related items (PRIs) go into the computation of the imputed underpayment (IU) regardless of whether they would result in additional income tax if properly reported by the partners. The issue of whether there is a chapter 1 impact doesn’t go into consideration of whether an adjustment goes into the IU computation but rather goes into the analysis of whether the item is a PRI or not. We are treating like 14 as a PRI (-------------------------------------------------------------------------------------------------------
-----------).

We do not have any guidance on BBA and SECA. I know LBI (IRS-side) has done some for its agents. I don’t have the final versions, just the draft versions we reviewed.

Please let me know if you have any questions.

Thanks,
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