Page 103 - 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’s taxable year (often a calendar year).186 [186 Sec. 6031(b).]
Statute of limitations
Absent an agreement to extend the statute of limitations, the IRS generally cannot adjust a partnership item for a partnership taxable year if more than three years have elapsed since the later of the filing of the partnership return or the last day for the filing of the partnership return. The statute of limitations is extended in specified circumstances such as in the case of a false return, a substantial omission of income, or no return.
Adjudication of disputes concerning partnership items
As under the TEFRA rules, a partnership adjustment can be challenged in the Tax Court, the district court in which the partnership’s principal place of business is located, or the Court of Federal Claims. However, only the partnership, and not partners individually, can petition for a readjustment of partnership items.
If a petition for readjustment of partnership items is filed by the partnership, the court with which the petition is filed has jurisdiction to determine the tax treatment of all partnership items of the partnership for the partnership taxable year to which the notice of partnership adjustment relates, and the proper allocation of such items among the partners. Thus, the court’s jurisdiction is not limited to the items adjusted in the notice.
Some small partnerships with 10 or fewer partner are not subject to the TEFRA audit regime unless they elect to be subject to TEFRA.45 This regime applies to partnerships composed of 10 or fewer partners, each of which is an individual (but not a nonresident alien), a C corporation, or an estate of a deceased partner.
45 I.R.C. § 6231(a)(1) (“(a) Definitions. For purposes of this subchapter – (1) Partnership. (A) In general. Except as provided in subparagraph (B), the term ‘partnership’ means any partnership required to file a return under section 6031(a). (B) Exception for small partnerships (i) In general. The term ‘partnership’ shall not include any partnership having 10 or fewer partners each of whom is an individual (other than a nonresident alien), a C corporation, or an estate of a deceased partner. For purposes of the preceding sentence, a husband and wife (and their estates) shall be treated as 1 partner. (ii) Election to have subchapter apply. A partnership (within the meaning of subparagraph (A)) may for any taxable year elect to have clause (i) not apply. Such election shall apply for such taxable year and all subsequent taxable years unless revoked with the consent of the Secretary.”).
© Terence Floyd Cuff and Jerald David August, 2016
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