Page 154 - 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
the income is allocated. Many partnerships in this situation will make the push out election.
The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016) reports:
Determining imputed underpayment amount: adjustments to distributive shares
In determining an imputed underpayment, any adjustment that reallocates the distributive share of any item from one partner to another is taken into account by disregarding any decrease in any item of income or gain and disregarding any increase in any item of deduction, loss, or credit.204 [204 Sec. 6225(b)(2).]
Example
For example, assume that a partnership has two partners, L and M. Under the partnership agreement, $100 of rental income is allocated to L and $70 of depreciation and interest deductions are allocated to M for the taxable year. The Secretary notifies the partnership and the partnership representative of an administrative proceeding initiated at the partnership level with respect to the partnership’s return for 2024. Assume that the Secretary determines that the $70 distributive share of depreciation and interest deductions should be reallocated from M to L. The imputed underpayment of the partnership is determined without decreasing the $100 of rental income by the $70 of depreciation and interest deductions. The adjustment is a $70 increase in income. Assume that the highest rate of Federal income tax applicable to individuals or corporations in 2024 is 39.6 percent. The product of $70 and 39.6 percent is $27.72, the amount of the imputed underpayment. However, the partnership may implement procedures for modifying the imputed underpayment as so determined.
In the case of any adjustment which reallocates the distributive share of any item from one partner to another, the adjustment will disregard –
 any decrease in any item of income or gain, and
 any increase in any item of deduction, loss, or credit.77
77 I.R.C. § 6225(b)(2)(“(2) ADJUSTMENTS TO DISTRIBUTIVE SHARES OF PARTNERS NOT NETTED. – In the case of any adjustment which reallocates the distributive share of any item from one partner to another, such adjustment shall be taken into account under
© Terence Floyd Cuff and Jerald David August, 2016
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