These are the steps APS takes when a non-docketed case is received:

The processing procedures discussed in IRM 8.19.10.3.2.1 (other than verifying the statute of limitations date) also apply to docketed cases. In addition, after establishing the controls as stated in IRM 8.19.10.3.4, forward the case file to Associate Area Counsel for answer.

If multiple petitions have been filed, advise Associate Area Counsel at the time the case is sent for answer so that the appropriate action can be taken. Until Associate Area Counsel advises which petition is controlling, control each docket number on ACDS as a separate partnership case workunit.

When Appeals is notified of the controlling docket number, all other related docket numbers will be dismissed. Upon receipt of the TLCATS Transmittal with dismissal information, APS updates ACDS as follows:

When copies of the dismissals are received, APS closes the dismissed docketed cases on ACDS as follows:

Place copies of the dismissals in the TEFRA partnership administrative file.

If the case was controlled on the Pass-Through Control System (PCS), APS notifies the key case CPF that the TEFRA key case is docketed.

APS instructs the CPF to mark their key case file to show the docket number and to insert a statement that no agreement forms should be executed without contacting the AO first.

APS instructs the CPF to add the docket number to the PCS database.

The key case CPF should be notified with this information using secure email.

The case level information specific to non-docketed TEFRA cases that must be input on ACDS is as follows:

The following information represents return level information for TEFRA partnership cases that must be input on ACDS.

The one-year statute date is the date by which the Service must make the TEFRA assessment on the individual partner, without any further statute extension. This date can be verified using the TSUMY command codes.

Once the TEFRA assessment is made, the one-year statute date must be updated to "11111111" and the assessment amount must be input by whoever completes the case.

The investor closing code is a one digit code to communicate the event that created the one-year statute date. The code is input using CC TSCHG and will be input immediately after the one-year statute date when it is entered.

The code will be displayed on CC TSINQI.

The following codes are to be used when entering or updating a one-year statute date:

The one-year statute date will be entered as follows: TSCHG 05-MMDDYYYYA, where A is the Investor Closing Code.

The 120-Day Date is the date that is 120 days after the Notice of Beginning of Administrative Proceeding (NBAP) is issued to the last notice partner. It signifies the earliest date that a FPAA can be issued to the Tax Matters Partner (TMP) without triggering an "untimely notice to a partner" problem. See IRM 8.19.1.6.7.

The key case CPF manually inputs the 120-Day Date to the key case record by CC TSCHG using Form 8339.

The 120-Day Date may be researched by using CC TSINQP.

The 60-Day Date is the date that the FPAA was mailed to the TMP. The FPAAs for the notice partners must be mailed within 60 days of mailing the FPAA to the TMP.

If the FPAA is not mailed to a notice partner by the 60th day after the FPAA was mailed to the TMP, and the TEFRA proceedings are still ongoing at the time he/she receives notice, the partner may elect to have the partnership items treated as nonpartnership items under IRC 6223. See IRM 8.19.1.6.7.

If the FPAA is not mailed to a notice partner by the 60th day after the FPAA was mailed to the TMP, and the proceeding has already been completed, the partnership items will automatically convert to nonpartnership items unless the partner elects to apply the FPAA, a court decision, or settlement agreement. See IRM 8.19.12.8.

The 60-Day Date may be researched using CC TSUMYP and CC TSINQP.

The 424 indicator shows that a full record has not been established on AIMS. When the 424 indicator appears on the PCS record, only the following will be displayed on the PCS record:

The AIMS name and statute date for the account will not appear on the PCS until the record is fully established on AIMS.

The PICF indicator prevents an AIMS account from closing until all linkage record freezes are released using CC TSCLS.

The PICF indicator is automatically set on the AIMS record by establishing the record on PCS.

The PICF indicator appears on an AMDIS or AMDISA display by the literal PICF Code X on page 1.

PICF indicator codes and conditions are as follows:

The TEFRA indicator identifies key case, tier, and other investor records as TEFRA or non-TEFRA.

On a TSUMY screen the "T" will appear to indicate it is a TEFRA case. A blank indicates non-TEFRA.

On a TSINQ screen, the word Yes will appear in the TEFRA field.

The tier indicator identifies investor records that are pass-thru entities. These records appear in the PCS on the key case record and on the investor record.

The tier indicator appears as a "#" on TSUMY and TSINQ screens.

The penalty/affected item report indicator identifies one-year statute dates that are present only for penalty or affected items purposes. When the indicator is present, it alerts a user to the fact that the one-year statute date is for a penalty and/or an affected item issue, and that the TEFRA tax adjustment issue is already complete.

The penalty/affected item report indicator is displayed on TSINQ and TSUMY screens immediately after the one-year statute date, i.e., MMDDYYYYXP (04151998XP) (Where X = the Investor Closing Code).

The TEFRA Penalty/Affected Item code determines the type of notice generated for partners in a TEFRA key case.

There are five different penalty/affected item codes. Each code has a significant meaning and causes different notices and attachments to be generated by the CPF. Only the codes A, P, and X are all applied at the key case level.

The codes have the following significance:

The TEFRA penalty/affected item code is displayed on TSINQ and TSUMY screens.

Form 886-Z (TEFRA Partners’ Shares of Income) is used to show the partners' pro-rata share of the corrected partnership items, penalties, and affected items.

Form 886-Z shows the partners’ name, address, TIN/SSN and profit sharing or loss percentage in the TEFRA partnership. The mailing addresses shown are usually those provided with the partnership return and may not be current. They are perfected by the key case CPFs when PCS interfaces with AIMS before an FPAA is issued.

Verify that the profit or loss sharing percentage of all partners shown on the Form 886-Z totals 100%. If the profit or loss sharing percentage of all partners shown on the Form 886-Z does not total 100%, review the administrative file for the examiner's explanation of the discrepancy. If it cannot be determined from the file, consideration should be given to returning the case as a premature referral if the case is non-docketed.

The corrected totals of all partnership items must reconcile with the corrected amounts shown on the examiner’s Form 4605-A. The adjustments shown on the Form 4605-A must also reconcile with the Schedule of Adjustments page attached to the 60-day letter or FPAA. If these amounts do not reconcile, the AO should contact the examiner for clarification.

One copy of the Form 886-Z will be used by the key case CPF to certify the date and to whom the NBAPs (Notice of Beginning of Administrative Proceeding) were mailed. The mailing of an NBAP to each notice partner is a statutory requirement.

See IRM 8.19.1.6.7 for information regarding the requirements for mailing timely notices.

If the key case CPF has identified and linked non-notice partners, a separate form 886-Z will show their names and addresses. This information is included to assist in soliciting agreements for affected item issues.

The TCS will generally complete a revised Form 886-Z when closing the case. Only the adjusted partnership items need to be included on the form. Addresses are only needed on the Form 886-Z when Appeals mails agreement forms to the partners. See IRM 8.19.11.6.2.

For non-docketed cases, a written protest may be filed by the TMP and/or any notice partner or notice group.

There may be more than one protest in the file.

Partner level elements of penalties or affected items proposed by Compliance should be included in an Affected Item Report. If this report is not in the file, contact the examiner to obtain a copy.

If partner level elements of penalties or affected items were proposed and the examiner did not prepare the report, consider returning the case to Compliance to prepare the report, if the case is non-docketed. See IRM 8.19.10.5.7 if penalties or affected items are at issue.

Under TEFRA, a Power of Attorney and Declaration of Representative (Form 2848) should be the POA of the TMP and the TMP should sign the Form 2848. In filling out the Form 2848 include the partnership’s TIN and the partnership’s name and address preceded by the name of the TMP and that the person is the TMP. There may be situations where other partners wish to participate in the TEFRA exam and may wish to have a representative. Those partners should complete their own Forms 2848. However, it is important to note that partners other than the TMP and those partners’ POAs are generally not authorized to sign a partnership level statute extension.

The TMP, not a representative, is the best person to sign legally significant documents, such as consents on behalf of the partnership or settlement agreements that bind non-notice partners. It is always advised to seek counsel approval when a POA is signing a statute extension, since failure to complete Form 2848 correctly can potentially lead to barred statutes.

One or more of the following check sheets (which are now mandatory for Compliance) should be in the administrative file:

For non-docketed cases, schedule the conference with the TMP. Send a conference letter to the TMP regardless of who filed the protest. Letter 4266 should be used when scheduling the conference with the TMP. If a partner other than or in addition to the TMP filed a protest, a standard Letter 965 should be sent to the partner.

For docketed cases, schedule the conference with the counsel of record by using Letter 970.

The TMP is required to notify all partners, notice or non-notice, of the scheduled conference.

Appeals and the TMP will determine the time and place for all conferences. Arrangements will generally not be changed merely for the convenience of another partner.

If the conference requires space to accommodate a large group of participants, the AO should inquire if adequate government facilities are available. However, if it is necessary to rent conference space, the TMP should make the arrangements and be responsible for the cost.

IRC 6224(c)(1) allows partners to enter into a settlement agreement to fix the correct treatment of partnership items with finality. IRC 6224(c)(2) gives other partners the right to request a settlement consistent with another partner’s settlement of partnership items.

The request for consistent settlement must be made by the later of:

The partner must request the consistent settlement in writing and identify the specific settlement for which he/she is requesting consistent settlement.

The consistent settlement will be processed on Form 870-PT(AD) and identified as "Consistent Settlement." Appeals personnel should write the term "Consistent Settlement" on the top of the agreement form. See IRM 8.19.1.6.11.1. For docketed cases, also follow the procedures in IRM 8.19.13.

Consider any effect the settlement will have on the ability of the CPF to process the partner returns. When a settlement has been formulated in a large project case, the key case CPF should be provided the terms of the settlement and pro forma copies of the documents that they will be required to process.

If a closing agreement (Form 906) is required, Appeals is responsible for preparing all closing agreements and securing them from the partners. Refer to IRM 8.13.1.2.6 for information when using closing agreements in docketed cases.

If partial agreements are required, Appeals is responsible for preparing all partial agreements and securing the agreements from all partners. Refer to IRM 8.19.11.11 for more information on partial agreements.

If the case is not linked on PCS, the CPF cannot be used to mail any agreement forms or FPAAs to the partners.

Avoid settlements based upon a net cash investment unless the examiner has already substantiated the amount of each partner's cash investment. The key case CPF will not have the means to verify cash investments. Cash out-of-pocket settlements based on a partner's cash investment are generally not compatible with the concept of a unified proceeding because of the verification problem.

If a partner's cash contribution percentage does not equal his/her profit and loss percentage, a cash out-of-pocket settlement may also create consistency problems.

Avoid this problem by offering all partners their pro-rata share of a specific dollar amount for settlement purposes.

If the correct allocation of the partnership interest is an issue being considered, do not accept any agreement forms unless all changed partners agree to the allocation by signing appropriate agreement forms. The allocation of partnership level items of all partners affected by the allocation must be fully disclosed on the Schedule of Adjustments page included with those partners' agreement forms. See IRM Exhibit 8.19.11–5 and IRM Exhibit 8.19.11–6 for sample Schedules of Adjustment pages for allocation issues.

If the key case CPF is mailing the agreement forms, include instructions on Form 3210 to alert the key case CPF to return the agreement forms to you without executing them. Include envelopes to ensure that the CPF returns the agreement forms to you. These packages are sent electronically.

Notify the Pass-through Coordinator that is assigned to execute agreements at the CPF that any agreements received there should be returned to you and not be executed.

This is a whipsaw issue requiring agreement by all parties. If the reallocation has an effect on basis, reflect the corrected basis amounts on the Form 886-Z.

The determination of a partner's adjusted basis in the partnership which is not properly determinable at the partnership level is an affected item. The correct treatment of an affected item must be determined after the partnership proceeding is concluded. See IRM 8.19.1.6.9.3 for a discussion of adjusted basis as an affected item.

When changes are made at the partnership level which affect basis, clearly explain the change in the Form 3210 and in the remarks section of the Form 4605-A. Each partners' basis should be shown on the Form 886-Z. These packages are sent electronically.

Where there are many direct and indirect partners in a TEFRA partnership, it may be beneficial for both the IRS and the partnership to process the case by having the partnership pay the assessment instead of distributing the adjustments to all partners.

This type of a settlement would be particularly useful in large promotions when the CPF is either holding hundreds of partners in suspense or has decided to not link one or more indirect partners because there are hundreds of partners that would have to be linked to that partner. Allocating adjustments to hundreds of indirect partners requires substantial resources by the CPF and the dilution of the adjustments after the allocation may ultimately result in little or no tax owed by these partners.

This type of settlement would also often be beneficial to the partnership as it would not have to amend hundreds of Schedule K-1s for subsequent tax years if the settlement would have resulted in additional deductions in those years.

The details of a partnership level settlement are explained in a Form 906, Closing Agreement on Final Determination Covering Specific Matters. Generally, a partnership level agreement can only be secured when the adjustments passing through to all underlying partners will result in a deficiency.

The highest level effective tax rate should be used when calculating the amount of tax owed. The partnership must also pay all additions to tax including interest and penalties.

The payment made by the partnership is considered a distribution to the partners in the year paid or the year when the payment became fixed and determinable.

The impact of the payment as a distribution to the partners should be included in the Form 906 settlement agreement.

The payment made by the partnership will impact the basis of partners. The partners' capital accounts and basis should be increased by the amount of income that should have been reported, and then reduced by their share of the tax paid by the partnership. That share is treated as a distribution in the year paid and will generate additional tax to the extent it exceeds the partner's outside basis or increases income (by reducing basis) on the sale of the partnership interest.

If this type of a settlement is being contemplated, the AO should contact the Appeals TEFRA Technical Specialists for additional information.

An entity that is treated as a partnership for U.S. tax purposes and has a foreign partner could be required to withhold tax under the following withholding tax authorities:

The withholding tax under IRC 1441 and IRC 1442 requires:

The withholding tax under IRC 1446 requires any partnership engaged in a trade or business within the U.S. to withhold tax on a foreign partner's allocable share of ECTI.

Partnerships should also be aware of possible withholding obligations under IRC 1443 (regarding ECTI allocable to IRC 501(c) foreign tax exempt organizations and gross investment income of a private foundation) and IRC 1445 (regarding the disposition of U.S. real property interest by a foreign partnership).

Taxes withheld on a foreign partner's income under IRC 1441, IRC 1442, and IRC 1446 are considered partnership items. IRC 6231(a)(3). An examination of a TEFRA partnership with respect to these withholding tax sections is subject to the TEFRA partnership procedures.

Appeals technical employees encountering the foreign withholding tax issue on a TEFRA partnership should contact the TEFRA team member assigned to their case or the Appeals TEFRA Technical Specialist(s).

Issue a no-change FPAA (IRM 8.19.12), if:

Obtain settlement agreements showing no change from all notice partners remaining in the proceeding (IRM 8.19.11).

Issue a No Adjustments Letter (Letter 2621) if:

Be careful to use the no-change procedure only if no partnership level item is changed and the TMP has agreed to the no-change determination. Some determinations may appear to be a no-change but are not. Changes to partnership level components of basis, at risk and passive losses are not no-change situations. See paragraphs (2), (3) and (4) below for details.

Changes to partnership level components of basis are not no-change situations. Some partnership level components for basis are the amounts of:

Changes to partnership level components of at risk are not no-change situations. Some partnership level components of at risk are:

Changes to partnership level components of passive activity losses are not no-change situations. Some partnership level components of passive activity losses are:

In addition to paragraphs (2), (3) and (4) above, the following should also not receive a no-change settlement agreement or a no-change FPAA:

Follow the usual format in preparing the ACM for a TEFRA partnership case. Include an evaluation of the penalty in the ACM.

Include an evaluation of each affected item at issue in the abbreviated affected item ACM. See IRM 8.19.10.5.7 for guidelines in preparing the affected item ACM.

Prepare a Form 5402 using the customized Form 5402 for TEFRA key cases in APGolf. The type code "TEFRA" on ACDS will allow you to generate a customized Form 5402.

Instructions for preparing the customized Form 5402 may be found in the APGolf utilities menu and on the Appeals TEFRA website.

It is recommended that a copy of the Schedule of Adjustments page be shared with the TMP before having agreement forms mailed to the partners. This is to ensure that the amounts shown on the Schedule of Adjustments accurately reflect the negotiated settlement. Procedures for preparing the Schedule of Adjustments page and mailing the agreement forms to the partners are covered in IRM 8.19.11.

An agreement form will not be mailed to the TMP in his capacity as the TMP unless there are non-notice partners. This is also covered in IRM 8.19.11.

After the Form 5402, ACM, Schedule of Adjustments page, and agreement forms (if Appeals will be mailing them to the partners) are prepared, submit the case to your ATM for review and approval.

All settlements must be reviewed and approved by the manager before agreement forms are mailed to the TMP or to the partners. This is especially important because of the consistent settlement provisions of the unified proceedings. If just one partner agreement is erroneously executed, the Service may be bound to the same settlement for all unagreed partners.