Page 183 - 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
only formal requirement. Some professional partnership representatives may emerge. Some accountants or tax attorneys may serve as partnership representatives. Some partnerships may wish to establish an entity to serve as partnership representative. Some partnerships will look to managing partners, syndicators, managers, employees, officers, controlling partners, or others to serve as partnership representative.
The partnership audit rules provide for the partnership to designate the partnership representative. The partnership audit rules do not say what happens if the partnership representative refuses to serve. The partnership might designate the Commissioner or Internal Revenue, the Secretary of the Treasury, the Chief Justice of the United States, or the President of the United States to serve as partnership representative. We can speculate that the Internal Revenue Service will not accept these designations if those persons refuse to serve as partnership representative.
The partnership audit rules do not explicitly require that the partnership representative have legal capacity. It is not clear what happens if the partnership representative has lost normal legal capacity but enters into an agreement with the Internal Revenue Service. This will create interesting legal and policy questions. “An agent’s actual authority terminates (1) as agreed by the agent and the principal, subject to the provisions of § 3.10; or (2) upon the occurrence of circumstances on the basis of which the agent should reasonably conclude that the principal no longer would assent to the agent’s taking action on the principal’s behalf.”93 It is not clear whether the authority of the partnership representative is subject to this limitation.
The partnership needs to consider who will make an appropriate partnership representative. Consider the age of the partnership representative. The audit and subsequent proceedings may go on for a decade or more. The partnership representative should be young enough that he will be effective through the audit. The partnership also should consider the background and temperament of the partnership representative. The partnership representative should be someone appropriate to exercise the broad powers of the partnership representative. The partnership representative also should be someone that the partnership can control.
(1) by actions taken under this subchapter by the partnership, and
(2) by any final decision n in a proceeding brought under this
subchapter with respect to the partnership.
93 Restatement (Third) of Agency § 3.09.
© Terence Floyd Cuff and Jerald David August, 2016
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