Page 136 - 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
should be detailed in proposed Treasury Regulations. Many questions are not fully clarified to date. Determining appropriate modifications should provide Treasury and the Internal Revenue Service with important challenges and easily could increase the complexity of the audit process. We likely will not be able to answer many of these questions until the regulations are issued in proposed form and an interim notice from the Internal Revenue Service is issued.
a. General Explanation on Calculating Imputed Underpayment.
The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016) explains calculating the imputed underpayment:
Determination of the partnership’s imputed underpayment amount
An imputed underpayment of tax with respect to a partnership adjustment for any reviewed year [the year under audit] is determined by netting all adjustments of items of income, gain, loss, or deduction and multiplying the net amount by the highest rate of Federal income tax applicable either to individuals or to corporations that is in effect for the reviewed year.203 [203 Sec. 6225(b)(1). The rule for determining the imputed underpayment applies except as provided in subsection 6225(c), which provides that the Secretary shall establish procedures under which the imputed underpayment amount may be modified consistent with requirements imposed thereunder.] Any adjustments to items of
(6) YEAR AND DAY FOR SUBMISSION TO SECRETARY. – Anything required to be submitted pursuant to paragraph (1) shall be submitted to the Secretary not later than the close of the 270-day period beginning on the date on which the notice of a proposed partnership adjustment is mailed under section 6231 unless such period is extended with the consent of the Secretary.
(7) DECISION OF SECRETARY. – Any modification of the imputed underpayment amount under this subsection shall be made only upon approval of such modification by the Secretary.
(d) DEFINITIONS. – For purposes of this subchapter –
(1) REVIEWED YEAR [THE YEAR UNDER AUDIT]. – The term
‘reviewed year [the year under audit]’ means the partnership taxable year to which the item being adjusted relates.
(2) ADJUSTMENT YEAR [THE YEAR IN WHICH THE AUDIT CONCLUDES]. – The term ‘adjustment year [the year in which the audit concludes]’ means the partnership taxable year in which –
(A) in the case of an adjustment pursuant to the decision of a court in a proceeding brought under section 6234, such decision becomes final,
(B) in the case of an administrative adjustment request under section 6227, such administrative adjustment request is made, or
(C) in any other case, notice of the final partnership adjustment is mailed under section 6231.
© Terence Floyd Cuff and Jerald David August, 2016
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