Page 137 - 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
credit are taken into account as an increase or decrease, as the case may be, in the figure resulting from this multiplication. Any net increase or decrease in loss is treated as a decrease or increase, respectively, in income. Netting is done taking into account applicable limitations, restrictions, and special rules under present law.
Examples
Example. – Assume that a partnership reports the following items on its return for taxable year 2018 (dollar amounts in thousands):
 rental income of $100
 depreciation deduction of <$70>
 interest expense deduction of <$20>
 deduction for compensation paid of <$50>
In an examination of the partnership’s taxable year 2018, the Secretary determines that depreciation was <$80>, not <$70>, for the year. (Assume that this change does not affect depreciation in other taxable years.) The Secretary also finds that $5 of rental income was omitted, for total rental income of $105, not $100, for the year. The adjustment reflecting an increase of $5 of rental income is netted with the adjustment reflecting the <$10> change in the depreciation (both ordinary in character and not subject to differing limitations or restrictions). The resulting adjustment is a net increase in loss of <$5>. There is no imputed underpayment. For the adjustment year [the year in which the audit concludes] (not 2018, the reviewed year [the year under audit]), the partnership has an increase in non-separately stated loss of <$5> (or a reduction in non-separately income of <$5>).
Example. – As another example, assume a partnership reports the following items on its return for taxable year 2019 (dollar amounts in thousands):
 ordinary income of $300
 long-term capital gain (from asset sales) of $125, long-term capital loss (from asset sales) of <$75>, for a net long-term capital gain of $50
 depreciation deduction of <$100>
 tax credit of $5
© Terence Floyd Cuff and Jerald David August, 2016
68