Page 246 - 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
required tax for the reviewed year (and thus bring down the liability of the partnership for the imputed underpayment).
 The partnership nevertheless may have difficulty enforcing this requirement.
 The partnership agreement might contain some remedy or liquidated damages if a partner fails to amend his return and pay the required tax.
 Query: can the remedy be enforced under state law?
 The partnership agreement might address what happens if some partners amend their returns and pay tax but others do not. This might make the nonamending partners liable to contribute for the remaining imputed underpayment.
 Should the partners be required to provide the partnership with verification that they have amended their returns and evidence that they have paid their tax liabilities?
 The partnership agreement might mirror the consistency requirement of Section 6222.144
144 I.R.C. § 6222 provides:
SEC. 6222. PARTNER’S RETURN MUST BE CONSISTENT WITH PARTNERSHIP
RETURN.
(a) IN GENERAL. – A partner shall, on the partner’s return, treat each item
of income, gain, loss, deduction, or credit attributable to a partnership in a manner which is consistent with the treatment of such income, gain, loss, deduction, or credit on the partnership return.
(b) UNDERPAYMENT DUE TO INCONSISTENT TREATMENT ASSESSED AS MATH ERROR. Any underpayment of tax by a partner by reason of failing to comply with the requirements of subsection (a) shall be assessed and collected in the same manner as if such underpayment were on account of a mathematical or clerical error appearing on the partner’s return. Paragraph (2) of section 6213(b) shall not apply to any assessment of an underpayment referred to in the preceding sentence.
(c) EXCEPTION FOR NOTIFICATION OF INCONSISTENT TREATMENT.
(1) IN GENERAL. In the case of any item referred to in subsection (a),
if
(A) (i) the partnership has filed a return but the partner’s treatment on the partner’s return is (or may be) inconsistent with the treatment of the
item on the partnership return, or
(ii) the partnership has not filed a return, and
the inconsistency,
(B) the partner files with the Secretary a statement identifying
© Terence Floyd Cuff and Jerald David August, 2016
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