Page 133 - The TEFRA Partnership Audit Rules Repeal:

ALI CLE Live Video Webcast / “The TEFRA Partnership Audit Rules Repeal: Partnership and Partner Impacts” June 7, 2016, Jerald David August and Terence Floyd Cuff
in year 2, elect out in year 3, be subject to the consolidated audit rules in year 4, and elect out in year 5. The partnership elects the application of Section 6221(b) (election out of the new audit rules) for the taxable year. The new audit rules do not require direct participation by the partners in the decision to elect out. The requirement of a partner vote, if any, is left to the terms of the partnership agreement. It appears likely that an individual partner could be subject to the elect out regime even though he votes against it.
j. Making Election Out.
The election out –
 must be made on a timely filed return for the taxable year, and
 must include (in the manner prescribed by the Secretary) a disclosure of
 the name and
 taxpayer identification number of each partner of the partnership.
The partnership must notify each partner of the election out in the manner prescribed by the Secretary. This should be prescribed in proposed Treasury Regulations.
The partnership agreement perhaps should contain a provision that authorizes the election out of the audit regime and specifies how the partnership should approve the election out. The partnership agreement should be clear concerning what vote is required to authorize the election out. It may also contain provisions when the election out is not authorized for the partnership. Perhaps the agreement will require a prior majority vote (based on capital and/or profits) of the partners or members or even a supermajority to elect out of the consolidated audit regime. Perhaps the agreement will require only a majority vote. Perhaps the agreement will leave the decision to partnership management. This final solution may prove controversial when the election out is made.
(ii) the statements such S corporation is required to so furnish shall be treated as statements furnished by the partnership for purposes of
paragraph (1)(B).
(B) FOREIGN PARTNERS. – For purposes of paragraph (1)(D)(ii), the Secretary may provide for alternative identification of any foreign partners.
(C) OTHER PARTNERS. – The Secretary may by regulation or other guidance prescribe rules similar to the rules of subparagraph (A) with respect to
any partners not described in such subparagraph or paragraph (1)(C).
© Terence Floyd Cuff and Jerald David August, 2016
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