Page 200 - 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
dividend222 [222 Sec. 860.] with respect to the reviewed year [the year under audit]. Guidance coordinating the receipt of a statement from an audited partnership by a RIC or REIT with the deficiency dividend procedures is expected to be issued by the Secretary.112
f. Items are Pushed Out for the Year in which the Partner Receives Statement of Adjustments.
The partner’s push out tax liability applies for the year in which he receives the statement of adjustments.
Query: What happens if push out partner is itself a partnership that has terminated for tax purposes or otherwise has ceased to exist?
g. Summary of Push Out Regime.
A safety valve for the partnership’s avoiding have to pay the imputed underpayment (and additions to tax) was provided by Congress. The idea is that the partnership is audited (not the partners) and the sole agent for conducting the audit, appeals, and litigation is vested with the partnership representative and not the partners. Yet, if the partnership makes the election within 45 days of the mailing of the final partnership adjustment (“FPAA”) under Section 6226(b), and, in accordance with guidance from the Internal Revenue Service, issues to each partner for the reviewed year [the year under audit] as well as to the Internal Revenue Service a statement of each partner’s distributive share of any adjustment to income, gain, loss, deduction or credit set forth in the FPAA, i.e., the Section 6226 statement.
A qualifying partnership may make this election and comply with the written notice and information requirements. The partnership avoids being assessed the tax attributable to the imputed underpayment. Instead, each partner receiving information contained on the Section 6226 statement will owe additional income taxes for the reviewed year [the year under audit]. His taxes for the reviewed year are increased by tax on his or its share of the items adjusted for the reviewed year plus with respect to any tax year after the reviewed year and before the adjustment year which includes the Section 6226 statement. His taxes are increased by the amount by which the income tax imposed increases due to the adjustment of tax attributes.113 Penalties,
112 See, also, National Association of Real Estate Investment Trusts, letter to the Internal Revenue Service, dated April 15, 2016, Re: Notice 2016-23: Request for Comments Regarding Implementation of the New Partnership Audit Regime Enacted as Part of the Bipartisan Budget Act of 2015, Doc. 2016-8083, 2016 TNT 75-22.
113 I.R.C. §§6226(b)(2)(A), 6226(b)(2)(B).
© Terence Floyd Cuff and Jerald David August, 2016
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