Page 113 - 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
A partnership may not qualify to elect out or may decline to elect out of the new regime on an annual basis. Where no election out is filed or if filed is not qualified, then with respect to such year, the partnership will be subject to audit under the new partnership audit regime. The partnership nevertheless may avoid assessment and collection at the partnership level by electing to push out adjustments to reviewed year [the year under audit] partners if requirements are satisfied under Section 6226(b).50 Each person was a partner
the partnership includes (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer identification number of each of the disregarded entity and the corporation that is its sole member, and each of them is taken into account as if each were a statement recipient in determining whether the 100-or-fewer-statements criterion is met.
As another example, such guidance may provide that a partnership with a trust as a partner can make the election if the partnership includes (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer identification number of the trustee, each person who is or is deemed to be an owner of the trust, and any other person that the Secretary determines to be necessary and appropriate, and each one of such persons is taken into account as if each were a statement recipient in determining whether the 100-or-fewer-statements criterion is met. Similar guidance may be provided with respect to a partnership with a partner that is a grantor trust, a former grantor trust that continues in existence for the two-year period following the death of the deemed owner, or a trust receiving property from a decedent’s estate for a two-year period.
As a further example, to the extent that such rules are consistent with prompt and efficient collection of tax attributable to the income of partnerships and partners, such guidance may provide rules permitting election out in the case of a partnership (the first partnership) with one or more direct or indirect partners which are themselves partnerships. Under any such guidance with respect to tiered partnerships, the sum of all direct and indirect partners (including each partnership and its partners) may not exceed 100 persons with respect to which a section 6031(b) statement must be furnished, and each partner must be identified. That is, eligibility of the first partnership to make the election requires the first partnership to include (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer identification number of each direct partner of the first partnership and each indirect partner (including each partnership and its partners) in every tier, and requires that each is taken into account in determining whether the 100-or-fewer-statements criterion is met.
50 I.R.C. § 6226 provides:
SEC. 6226. ALTERNATIVE TO PAYMENT OF IMPUTED UNDERPAYMENT BY PARTNERSHIP.
(a) IN GENERAL. – If the partnership –
(1) not later than 45 days after the date of the notice of final
partnership adjustment, elects the application of this section with respect to an imputed underpayment, and
(2) at such time and in such manner as the Secretary may provide, furnishes to each partner of the partnership for the reviewed year [the year under audit] and to the Secretary a statement of the partner’s share of any adjustment to income, gain, loss, deduction, or credit (as determined in the notice of final partnership adjustment),
© Terence Floyd Cuff and Jerald David August, 2016
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