Page 14 - Partnership Audit Rules - Drafting Partnership Agreements: The New Partnership Representative And The Outgoing Tax Matters Partner

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paid under the push-out rules under new Section 6226(b).35 As to result- ing overpayments in tax, the Blue Book instructs that in the case of an adjustment under a partnership AAR that would not result in an imputed underpayment, any refund is not paid to the partnership; rather, pro- cedures similar to the one for fur- nishing reviewed-year partners with statements reflecting the requested adjustment apply, with appropriate adjustments. The proposed regula- tions provide that the resulting re- fund for an overpayment in tax must be taken into account by the reviewed-year partners.
In accordance with Prop. Reg. 301.6227-1(b), an AAR may only be filed by a partnership for a part- nership tax year for which a part- nership return has been filed. How- ever, a partnership may not file an AAR more than three years after the later of: (1) the date on which the partnership return for the relevant year is filed; or (2) the last day for filing the partnership return for that
35 See Prop. Reg. 301.6227-1(a). If the adjust- ments requested in the AAR result in an im- puted underpayment, the partnership must take the adjustments into account under the rules described in Prop. Reg. 301.6227-2(b) unless the partnership makes an election under Prop. Reg. 301.6227-2(c), in which case each reviewed-year partner (as defined in Prop. Reg. 301.6241-1(a)(9)) must take the adjustments into account in accordance with Prop. Reg. 301.6227-3. If the adjustments re- quested in the AAR do not result in an im- puted underpayment (as determined under Prop. Reg. 301.6227-2(a)), such adjustments must be taken into account by the reviewed- year partners in accordance with Prop. Reg. 301.6227-3. A partnership, under the pro- posed regulations, may not file an AAR solely for the purpose of allowing the part- nership to change the designation of a part- nership representative. See Prop. Reg. 301.6223 (designation of the partnership rep- resentative).
36 The proposed regulations reserve with re- spect to coordinating the rules under Section 6227 with the requirements in Section 905(c) when the AAR includes an adjustment to the amount of creditable foreign tax incurred by the partnership. Comments are requested on
106D*points, Next 120D, Vjust JCE2:1
year (without extensions). No AAR may be filed after an NOPA has been mailed by the Service with re- spect to such year.36
Assessment of Imputed Un- derpayment; Interest and Penal- ties
Section 6232(a) provides that an im- puted underpayment is assessed and collected as if it were an assessment of income tax. However, with re- spect to an AAR described under Section 6227(b)(1), the underpay- ment is required to be paid when the AAR is filed. Section 6232(b) provides that except as otherwise provided by the new centralized au- dit rules, no assessment of a defi- ciency (and no levy or proceeding in any court for the collection of the adjustment amount) may be made or begun, etc., prior to: (1) the close of the 90th day after the day on which an FP A A was mailed; and (2) where a petition is filed under Sec- tion 6234 as to such notice, until a final decision from the court is is-
how a partnership can fulfill the requirements of Section 905(c), including those rules relat- ing to the assessment and collection of inter- est on certain refunds of creditable foreign taxes, while taking into account the objec- tives and purposes of the centralized partner- ship audit regime to improve the IRS’s abil- ity to effectively audit partnerships.
37 Prop. Reg. 301.6227-1(c) requires that state- ments be issued to reviewed-year partners in the case of an election under Prop. Reg. 301.6227-2(c) or an AAR not resulting in an imputed underpayment under Prop. Reg. 301.6227-2(d). Each statement must include the name and correct TIN of the reviewed- year partner; the current or last known ad- dress of the partner; the reviewed-year part- ner’s share of items originally reported to the partner (taking into account any adjustments made pursuant to a prior AAR filed under Section 6227); the reviewed-year partner’ s share of the adjustments requested in the AAR (per Prop. Reg. 301.6227-1(c)(2)); the date the statement is furnished to the partner; the partnership tax year to which the adjust- ments relate (the reviewed year); and any other information required by the forms, in- structions, or other guidance prescribed by Prop. Reg. 301.6227-1(e).
sued. Exceptions to Section 6232(b) are provided for adjustments arising from clerical or mathematical errors or where the partnership signs a waiver of restrictions on assessment or collection under Section 6232(b).
The interest on any partnership adjustment for the reviewed year will be the interest that would be determined under the generally ap- plicable interest rules for the period beginning on the day after the re- turn due date, i.e., the date for filing the partnership return (determined without regard to extensions), for the reviewed year, and ending on the return due date for the adjust- ment year (or, if earlier, the date payment of the imputed underpay- ment is made). Proper adjustments in the amount determined under these rules will be made for adjust- ments required for partnership tax years after the reviewed year and before the adjustment year by rea- son of the partnership adjustment.37 Any penalties, additions to tax, or additional amounts will be deter-
Prop. Reg. 301.6227-1(e)(2) describes re- viewed-year partners’ share of the adjustments requested in an AAR for purposes of the state- ments described in Prop. Reg. 301.6227-1(e)(1). Per Prop. Reg. 301.6227-1(e)(2), except when a specific partner’s share of an item is reflected on an AAR in a specific manner under Section 704(b), each reviewed-year partner’s share of an adjustment must be determined and reported to the reviewed-year partner in the same man- ner as the item to which the adjustment relates was originally determined and reported on the partnership return for the reviewed year. If the item to which the adjustment relates was not re- flected on the partnership’ s reviewed-year re- turn, the reviewed-year partners’ respective shares of the adjustment must be determined and reported to the reviewed-year partners in accordance with the manner in which the allo- cation of the items to which the adjustment re- lates would have been made under the partner- ship agreement and subject to the principles of Section 704(b) in the reviewed year. If the ad- justments, as requested in the AAR, allocate items to a specific partner or in a specific man- ner, the statement must reflect the adjustment as allocated in accordance with the AAR.
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Corporate Taxation