Page 65 - The TEFRA Partnership Audit Rules Repeal:

Partnership Agreement Provisions (cont.)
Provisions on the Selection and Removal of the Partnership Representative (cont.)
• Partnership might treat the adjustment, i.e. payment of imputed underpayment, as a demand loan to partners and prior partners from the reviewed year [the year under audit]. This requires a mechanism to allocate the adjustment among the partners and prior partners during the reviewed year [the year under audit]. The partnership agreement could contain a provision for securing the loan with partnership interests. The loan presumably should provide for interest. Distributions to the partner could be used to recoup the unpaid portion of the loan.
• Partnership agreement might treat the adjustment, i.e., payment of imputed underpayment as a recoupable draw to the partners and former partner. The partnership agreement could provide for clawback from partners and prior partners. The treatment as a draw should follow the considerations for a partner loan.
• The partnership agreement could merely offset the partner’s share of the adjustment against future distributions to the partner.
Copyright © 2016 Kostelanetz & Fink, LLP Coming changes to IRS Audits of partnerships 56