Page 247 - 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
 The partnership agreement should have extensive provisions concerning the partnership representative. Provisions might address:
 Who can be the partnership representative?
subsections (a) and (b) shall not apply to such item.
(2) PARTNER RECEIVING INCORRECT INFORMATION. A partner shall be
treated as having complied with subparagraph (B) of paragraph (1) with respect to an item if the partner
(A) demonstrates to the satisfaction of the Secretary that the treatment of the item on the partner’s return is consistent with the treatment of the
item on the statement furnished to the partner by the partnership, and
(B) elects to have this paragraph apply with respect to that
item.
(d) FINAL DECISION ON CERTAIN POSITIONS NOT BINDING ON
PARTNERSHIP. Any final decision with respect to an inconsistent position identified under subsection (c) in a proceeding to which the partnership is not a party shall not be binding on the partnership.
(e) ADDITION TO TAX FOR FAILURE TO COMPLY WITH SECTION. For addition to tax in the case of a partner’s disregard of the requirements of this section, see part II of subchapter A of chapter 68.
The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016)
explains:
Requirement of consistency with partnership return
The centralized system imposes a consistency requirement. A partner on its return must treat each item of income, gain, loss, deduction or credit attributable to a partnership in a manner that is consistent with the treatment of such income, gain, loss, deduction, or credit on the partnership return.191 [191 Sec. 6222(a).] An underpayment that results from a failure of a partner to conform to the partnership reporting of an item is treated as a math error on the partner’s return and cannot be abated under section 6213(b)(2).192 [192 Sec. 6222(b).] The underpayment may be subject to additions to tax.
Notice of inconsistent position
If the partnership has filed a return but the partner’s treatment on the partner’s return is (or may be) inconsistent with the partnership’s return, or if the partnership has not filed a return, the math error treatment and nonabatement treatment do not apply if the partner files a statement identifying the inconsistent position.193 [193 Sec. 6222(c).] Further, a partner is treated as having complied with the obligation to file a statement identifying the inconsistent position in the circumstance in which the partner demonstrates to the satisfaction of the Secretary that the treatment of the item on the partner’s return is consistent with the treatment of the item on the statement furnished to the partner by the partnership, and the partner elects the application of this rule.
A final decision in an administrative or judicial proceeding with respect to a partnership under the centralized system is binding on the partnership and all partners of the partnership.194 [194 Sec. 6223(b).] In contrast, a final determination in an administrative or judicial proceeding with respect to a partner’s identified inconsistent position is not binding on the partnership if the partnership is not a party to the proceeding.195 [195 Sec. 6222(d).] No inference is intended that the partnership is bound by any other proceeding to which it is not a party, such as an administrative or judicial proceeding with respect to a partner’s unidentified inconsistent position.
© Terence Floyd Cuff and Jerald David August, 2016
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