Page 118 - 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
on partnership activities and accept the Schedule K-1 as prepared.) The audited partner effectively represents himself and the partnership in these proceedings. Audit adjustments relating to partnership activities will be made directly as the partner level. The assessment will be made directly against the partner and normal deficiency rules will apply.
The returns of two or more partners may be audited in a particular taxable year. The activities of the partnership (in theory, at least) may be subject to audit in audits of two separate partners. If these audits are in the same district, we can hope that the Internal Revenue Service will coordinate audits and that the Internal Revenue Service will take consistent positions in different audits of the same partnership for the same taxable year. The Internal Revenue Service, however, is not bound by rule of law to take consistent positions in these different audits or to coordinate the audits. Whether the Internal Revenue Service will develop rules to coordinate multidistrict audits of multiple partners is a matter of conjecture. (We can hope that the Internal Revenue Service will be able to coordinate multiple single district audits and perhaps assign them to a single auditor.) Similarly, different taxpayers may make different arguments and take different tax positions.
Sound Internal Revenue Service coordination may significantly if not substantially decrease if different taxpayers in different districts are audited. We may hope that the Internal Revenue Service will develop coordinated cross- district audit procedures, but the Internal Revenue Service has not published coordinated audit procedures (either for single district audits or multi-district audits of multiple partners).
The audits may involve both partnership and nonpartnership issues. At appeals, the appellate officers may enter considerably different settlements, as they consider the settlement of both partnership and nonpartnership items. The results of various partner audits with respect to the same partnership may be diverse.
The audit of a partner that includes an audit of partnership activities may increase the likelihood of an audit of other partners. Also, other partners may be asked to extend their personal statutes of limitations until the first audit is resolved.
A partner may be a partner in a large partnership with many partnership assets, such as an up-REIT partnership. The personal audit of the partner may turn into an audit of the entire partnership and its operations. The Internal Revenue Service perhaps will take steps to initiate at least token audits of the
© Terence Floyd Cuff and Jerald David August, 2016
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