Page 164 - 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
applies is determined by reference to the amount of the partner’s distributive share of net gain or loss if the partnership had sold all of its assets at their fair market value as of the close of the reviewed year [the year under audit]. This may require further development in regulations.
Adjustments are made to –
 a partnership’s rental income from property A and
 its depreciation deductions with respect to property B.
Example 2. A corporate partner has –
 a 20 percent distributive share of rental income from property A,
 a 15 percent distributive share of depreciation deductions from property B, and
 a 20 percent distributive share of any gain in the reviewed year.
If the partnership had sold its assets at fair market value as of the close
of the reviewed year,
 the gain would have been $100, and
 the corporate partner’s distributive share would have been $20.
The portion of the imputed underpayment to which the lower rate applies with respect to the corporate partner is 20 percent.
l. Modification Procedures: Additional Procedures
Additional procedures to modify the amount of an imputed underpayment may be provided by the Internal Revenue Service on the basis of factors the Internal Revenue Service determines are necessary or appropriate to carry out the purposes of the provision. These procedures allow partnerships to demonstrate tax attributes or information with respect to the reviewed year [the year under audit] and with respect to reviewed year partners that could permit modification of the imputed underpayment to more closely approximate the amount of tax due with respect to the reviewed year if the partnership and partners had correctly reported and paid the tax due.
In the absence of regulations or guidance specifically addressing the manner in which these modifications or calculations are made, it is anticipated that partnerships will furnish to the Internal Revenue Service the necessary documentation, data, and calculations to determine the amount of the
© Terence Floyd Cuff and Jerald David August, 2016
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