Page 108 - 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 consent. Section 6232(a) provides that any imputed underpayment is assessed and collected in the same manner as if it were a tax imposed for the adjustment year [the year in which the audit concludes] by subtitle A, except that in the case of an administrative adjustment request that reports an underpayment that the partnership elects to pay, the underpayment shall be paid when the request is filed.
Section 6234 as amended by the BBA generally provides that a partnership may seek judicial review of the adjustments within 90 days of the date the notice of final partnership adjustment is mailed. Section 6235 provides the period of limitations on making adjustments. Section 6241 provides definitions and special rules, including rules addressing bankruptcy and treatment when a partnership ceases to exist.
After the effective date of the new audit regime, the new audit regime applies unless partnership can elect out which election out is required to be made annually. A partnership subject to the new rules nevertheless will have the opportunity to push out adjustments to reviewed year [the year under audit] partners in order to avoid assessment and collection at the partnership level. Many advisors anticipate that the push out election will be popular.
All partnership audits (whether foreign on domestic) are made at the partnership level unless the partnership elects out of the new regime. Adjustments are made at the partnership level unless the partnership elects out. Assessment is made at the partnership level unless the partnership elects out or makes a push out election to push out adjustments to reviewed year [the year under audit] partners.47
47 I.R.C. § 6221(a) (“(a) IN GENERAL. – Any adjustment to items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year (and any partner’s distributive share thereof) shall be determined, any tax attributable thereto shall be assessed and collected, and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share shall be determined, at the partnership level pursuant to this subchapter.”). The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016) advises:
Determination at partnership level
Under the centralized system, the audit of a partnership takes place at the partnership level. Any adjustment to items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year, and any partner’s distributive share thereof, generally are determined at the partnership level.187 [187 Sec. 6221(a).] Any tax attributable to these items generally is assessed and collected at the partnership level. The applicability of any penalty, addition to tax, or additional amount that relates to an adjustment of any item of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year or to any partner’s distributive share thereof is determined at the partnership level. Unlike prior law, distinctions between partnership items and
© Terence Floyd Cuff and Jerald David August, 2016
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