Partner tax generally not collected after partnership pays imputed underpayment

Number

202346016

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Tax Treatment Determined At Partnership Level; Partner's Return Must Be Consistent with Partnership Return; Recognition and Character of Gain or Loss on Sale or Exchange; Manner of Electing Optional Adjustment to Basis of Partnership Property

Topics

Procedure, penalties, and administration Partnerships

Code sections

§ 6221, § 6241, § 741, § 754

Ruling dated

May 1, 2023

Publicly released

November 17, 2023

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 2023, 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 reviewed a BBA examination case study in which a partnership paid the imputed underpayment and the example also appeared to assess tax against partners. The advice identified that treatment as the main concern. Generally, when the partnership pays the imputed underpayment, the IRS cannot separately assess or collect from a partner a partner-level tax caused by the partnership-related item adjustments. The advice recommended discussing revisions to the example.

Ruling snapshot

Question: After a partnership pays the BBA imputed underpayment, may the IRS also assess partners for tax resulting from the same partnership-related item adjustments?
Outcome: Advice given, generally no
Key authorities: IRC §§ 6221 and 6241

Full text (IRS public release)

 ID:         CCA_2023050114211948                                [Third Party Communication:

 UILC:       754.00-00, 741.00-00, 6221.00-                      Date of Communication: Month DD, YYYY]

             00, 6241.00-00
Number: 202346016
Release Date: 11/17/2023
From: ------------
Sent: Monday, May 1, 2023 2:21:19 PM
To: ---------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Bcc:
Subject: RE: 2023 Case Study - Ready for Counsel Review

Hi ---------,

Attached please find our comments to the slides and the factual summary
document. Our main concern is that the example appears to be assessing tax on the
partners as a result of the adjustments made in the BBA exam after the partnership
pays the IU. Generally when the partnership pays the IU, if a partner level tax results
because of the PRI adjustments, the Service cannot assess/collect against the partner
for that tax.

We think it may be helpful to schedule a call discuss our comments, and I am happy to
set up a call at a time / day convenient for you. Thank you!

Kind regards,
------

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