Page 155 - 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
h. Modification of Imputed Underpayment Amount.
The Internal Revenue Service is supposed to establish procedures for modification of the amount of an imputed underpayment.78 Modification procedures can include:
 the filing of amended returns by reviewed year partners [partners in the year under audit],
 determination of the imputed underpayment without regard to the portion of the underpayment allocable to a tax-exempt partner,
 modification of the applicable highest tax rates, including determining the portion of an imputed underpayment to which a lower rate applies, and
 additional procedures to modify imputed underpayment amounts on the basis of factors that the Secretary determines are necessary
paragraph (1) by disregarding – (A) any decrease in any item of income or gain, and (B) any increase in any item of deduction, loss, or credit.”)
78 I.R.C. § 6225(c). The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS- 1-16, March 2016) provides:
Modification of imputed underpayment amount
When an audit of a partnership is commenced, the Secretary notifies the partnership and the partnership representative of the administrative proceeding initiated at the partnership level. The Secretary also notifies the partnership and the partnership representative of any proposed partnership adjustment developed during the proceeding.205 The Secretary must establish procedures for modification of the amount of an imputed underpayment.206 One or more modification procedures may be implemented by the partnership after the initiation of the administrative proceeding, including before any notice of proposed adjustment. These procedures include the filing of amended returns by reviewed year partners, determination of the imputed underpayment without regard to the portion of it allocable to a tax-exempt partner, and modification of the applicable highest tax rates, including determining the portion of an imputed underpayment to which a lower rate applies.207 In addition, the Secretary may by regulations or guidance provide for additional procedures to modify imputed underpayment amounts on the basis of factors that the Secretary determines are necessary or appropriate to carry out the function of the modification provisions, that is, to determine the amount of tax due as closely as possible to the tax due if the partnership and partners had correctly reported and paid while at the same time to implement the most efficient and prompt assessment and collection of tax attributable to the income of the partnership and partners.
Anything required to be submitted pursuant to the modification of the amount of an imputed underpayment must be submitted to the Secretary not later than the close of the 270-day period beginning on the date the notice of a proposed partnership adjustment is mailed, unless the 270-day period is extended with the consent of the Secretary.
Any modification of the amount of an imputed underpayment is made only upon approval of the modification by the Secretary.
© Terence Floyd Cuff and Jerald David August, 2016
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