It is recommended that access to the group email box be limited for inventory control purposes.

Users are added or removed by the owner of the mailbox. User changes can be made by opening the Outlook address book and typing in "Access to" followed by the name of the email box without the "*" . Right click on the name and open properties. A box on the right will allow the owner to modify the users.

The group email box will accept secure email.

The owners need to ensure the secure messaging certificates are renewed timely.

An ITAMS ticket must be submitted to request a new certificate.

The certificate expiration date can be found by looking up the group email box on the Global Address Locator (GAL). Look up the mailbox in the GAL, right click on it and go to Properties. Click on the Add to Contacts button at the bottom of the properties and the click on the certificates tab. Click on the Properties button along the right hand side of the box. A box will open reflecting the certificate information and expiration date.

A new certificate can be requested up to 30 days prior to expiration date.

Several instances could arise where a non-Master File AIMS (NMF) data base is necessary to link the partner to the key case. For example, the entity could be a grantor trust and not required to file a return and the ultimate beneficiary has not filed either. In that case, use the trust's EIN when creating the non-Master File AIMS data base and link the trust to the key case. If the trust does not have an EIN, then the CPF will secure a "dummy" number using CC AMNON and that is used for the EIN of the trust.

Exempt organizations will also require a non-Master File AIMS data base be created prior to linking. The PCS will not allow for a link to an exempt organization Master File account. Use the exempt organization’s EIN when creating the account.

A non-Master File AIMS must be created when there is no record of a partner return being filed. See IRM 4.4.23, AIMS Procedures and Processing Instructions, Openings.

The AIMS non-Master File database is retained in the key case CPF, and research performed utilizing National Access Information (NAI), CFOL command codes, and CC NAMEE or NAMES.

When a subsidiary is a direct partner, only the parent needs to be linked.

When trying to identify a parent corporation of a subsidiary, CC INOLES may be used but it may not always be accurate. INOLE may show who the parent is currently, but that may not be the same parent for the year under examination. A better means to identify the parent for the year under examination is to use CC BMFOL.

Request CC BMFOLI on the subsidiary EIN. Find the taxpayer record with the same year-end as the key case or the proper year-end of the subsidiary for which the key case Schedule K-1 information would pass to the subsidiary.

Request CC BMFOLT for the module identified in (2) as being the correct one for the year in question.

The BMFOLT should reflect a TC 590 and an EIN of the parent for that tax period. If more than one EIN is shown, an inspection of the prior and subsequent year taxpayer records may provide the answer. Contact the Revenue Agent Reviewer for assistance. If still unable to make a determination, the Revenue Agent Reviewer may need to contact the key case examiner for clarification.

If no taxpayer record was identified in (2) above, check BMFOLT for the years before and after. If the same parent is identified in those two records, it is reasonable to conclude that the parent will be the same in the middle year. If the parent indicated is not the same in both years, contact the key case examiner for clarification.

Once the parent EIN is determined, a BMFOLT is requested to verify the parent filed a return. If the parent did not file, further research should be conducted to determine if the parent is also a subsidiary. If it is determined the parent is also a subsidiary, the research will continue until the "ultimate" parent is determined. The ultimate parent will be linked to the key case. Any intervening levels of parent corporations will not be linked.

Once the ultimate parent of the subsidiary is identified, use CC TSCHG item 04, to add a secondary name line which identifies the ultimate parent of the subsidiary. For example, the secondary name line would show ABC Corp, parent of XYZ, Corp.

If the parent did not file, and is not a subsidiary, contact the Revenue Agent Reviewer for assistance.

If a Limited Liability Company (LLC) that is a disregarded entity is a direct partner, that entity may be bypassed and the owner of the disregarded entity should be linked as the direct partner instead.

If the owner cannot be identified, then the disregarded entity will be linked non-Master File. Letter 5640, Schedules K-1 Verification, will be sent to the Schedule K-1 address asking where the partnership items were reported.

While the disregarded entity does not file a return, it should have an EIN. If the disregarded entity's EIN is not shown on the Schedule K-1, and the disregarded entity is a direct partner, the field RA may be contacted for assistance. A dummy number will be used as a last resort.

When the disregarded entity is not linked directly to the key case, but is itself an indirect partner, the owner/member should be linked directly and ignore the disregarded entity. The file should be notated.

If the ultimate owner of the disregarded entity is later identified, use CC TSCHG item 04, to add a secondary name line which identifies the ultimate partner of the disregarded entity. For example, the secondary name line would show John Doe, single member of XYZ, LLC.

A grantor trust that is a partner in a key case may be bypassed and the beneficiary directly linked to the key case and notices sent to the beneficiary.

If the beneficiary cannot be identified, then the grantor trust will be linked.

If the beneficiary of the grantor trust is later identified, use CC TSCHG item 04 to add a secondary name line which identifies the beneficiary of the trust. For example, the second name line would show John Doe, beneficiary. This additional line is needed for notice purposes.

The best practice is to link the beneficiary directly and ignore the trust. The beneficiary should also be linked to the tier in place of the grantor trust.

TE/GE partners include employee plans and exempt organizations. This may include charities, pensions, Individual Retirement Accounts (IRAs), etc.

Research CC INOLES to determine if an investor is EP or EO. If the investor has a "P" at the end of the TIN, or the screen goes directly to CC INOLET, the investor is EP. The return filed gives an indication as well.

Material TE/GE partners must be established on NMF prior to linkage

TE/GE will be forwarded a copy of the Schedule K-1 for all material TE/GE partners linked to TEFRA key cases. The Schedules K-1 will be sent to the point of contacts (POC) provided by the SB/SE HQ TEFRA Analyst.

TE/GE will be forwarded closing packages as the related key cases close to the POC.

TE/GE will be responsible to make any pass-through adjustments affecting their partners.

The input of CC TSLOD on a partner when the pass-through return is in Appeals (PBC 6XX) will result in the partner being established in a 295 PBC with a BSC CTF Indicator. If the partner is controlled by the Ogden campus, the partner should be established on AIMS in PBC 398 prior to the TSLOD. That will allow the partner to be established under the jurisdiction of the correct campus.

If a partner establishes under a 295 PBC in error, the partner database must be AMSOC'd back to PBC 398. A TSCHG will also have to be input to change the CPF indicator from BSC to OSC.

Updating the CTF indicator is important because it allows Appeals to determine which campus controls the partner. If the CTF indicator is not updated properly, Appeals will likely send the closing package to the wrong campus. It also ensures the partner return appears on the PCS 4-4 statute report in the correct campus.

When a foreign partner is identified as a material partner in a TEFRA partnership key case and has filed a return, link the filed return.

If the return is not filed, check NMF database for an NR return. If an NR return exists, link the return. Contact may need to be made with an international specialist.

The examining agent will be sent a memo stating that there is a foreign partner linked to the key case. The memo will be sent with the mailing list.

If a material foreign partner is identified in an underlying tier, then a memo should be prepared and sent separately to the agent.

Certain partnerships may file an election to be excluded from all of Subchapter K as provided in Treas. Reg. 1.761-2. This election is made with the first return, and then future Form 1065 filing requirements are removed. However, the partnership still exists and can invest in other entities. As a result, these entities may be partners in TEFRA partnerships. In that event, a NMF record will be created. The partners will need to be linked to the NMF entity under MFT 35.

These returns present another problem in that identifying the partners requires taxpayer contact. Because there are no filing requirements, Schedules K-1 are not available. In some cases, the originally filed return may be secured but the taxpayer should still be contacted to ensure there are no changes.

The key case CPF will send a non-filer letter to obtain information regarding the loss, income, or deduction taken on the partnership, trust or individual return. Do not contact the taxpayer if there is a "Z" Freeze or a TC 914 on the taxpayer account. If there is a "Z" Freeze or a TC 914 on the taxpayer account, give the partner information to the Campus TEFRA Coordinator for immediate, appropriate action. If the Campus TEFRA Coordinator learns the taxpayer is the subject of a criminal investigation, and that the taxpayer was sent notification that their partnership items have converted to nonpartnership items, that removes the taxpayer from the TEFRA proceeding. The Campus TEFRA Coordinator will inform the cooperating agent (or Special Agent) of the TEFRA proceeding of the related key case and the cooperating agent or Special Agent will take the appropriate necessary action.

For taxable IMF and BMF non-filers, a review of IRPTR transcripts needs to be completed to determine if a referral as an SFR is warranted.

In the case of non-filing trusts, every attempt will be made to determine if the trust is a pass-through entity, either through research or through contact with the taxpayer. If the trust is linked directly to the partnership, the key case agent may be contacted for assistance.

If the non-filing entity is identified as a Form 1120-S (filing requirement 1120-02 on INOLE) or a Form 1065, research should be done to determine the shareholders or partners. Every effort should be made to have material partners identified and linked as soon as possible. Taxpayer contact may be necessary.

The filing date of a partner's return is the beginning of the three year IRC 6501 statute. IRC 6629 is an extension of the IRC 6501 statute. The IRC 6501 will not be shortened by the earlier running of the IRC 6229.

TEFRA partnership items from an ongoing proceeding (e.g., DOJ cases) cannot be assessed by computational adjustment until after an SFR assessment is made. Where a taxpayer has not filed a tax return, there is no return information to which the partnership items can be computationally applied. Unsettled partnership items and affected item adjustments may be included as part of the SFR and stat notice if the SFR is not processed until after the TEFRA proceedings are complete.

Pass-through partners should only be loaded if they have material partners as explained in IRM 4.31.3.4.2. An exception would be a pass-through notice partner loaded to generate a notice where firm adjustments are not yet known.

All partners in a pass-through partner are not required to be linked. Only those partners that will be subject to an adjustment above tolerance should be linked. It may be necessary to link more partners if the impact of the adjustment is not determinable.

Initial loading may have been completed based upon estimated adjustments. The final adjustment numbers may result in a change to the build out. This may result in a change in the number of partners linked.

Changes to the linkage plan will be directed by a Revenue Agent Reviewer.

Some partnerships may have been designated as no load tiers. Those were tiers where no underlying partners were loaded because the adjustments became immaterial. With the application of AM2015-003 those tiers will no longer be loaded if they are immaterial.

No load tiers could still exist if an immaterial tier is loaded to generate a notice. This can occur when notices are sent before adjustments are known.

When a no load determination is made, it is important to remember to update the no load tier indicator on the PCS. Inputting the no load indicator on PCS will remove the tier from the PCS 8-7 Report, Unperfected Tier Report, and add it to the PCS 8-6 Report, No-load Report. The no load indicator (display as ‘X’) is added using PCS CC TSCHG item 35-X.

Paragraphs 5 through 12, below, are the explanation and procedures of no-load tiers for reference only. These were the procedures used prior to the release of this IRM when it was the practice to load all partners in a tier without regard to materiality.

Some partnerships have many levels of tiering. As a result, the percentage of any potential key case adjustment that may impact some lower level tiers becomes very diluted. When this occurs, the campus should review the tier to determine if resources should be expended to link its partners. There is no sense linking the tier partners if it is very likely that any adjustments will fall below tolerance. If there is any question as to whether the key case adjustment will impact the lower partners, then the tier investors should be linked.

The determination on whether or not to link should be made by a campus RA and may require discussions with the key case agent.

The first step is applying the tolerance levels outlined in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ at the tier level (see prior IRM revision). This should be a straight percentage. For example, a partnership adjustment (or potential adjustment) of $x divided by the number of partners. If the average adjustment will result in tax below tolerance, then no load the tier.

An exception to that rule occurs when the overall adjustment is very large. For example, if the overall adjustment is $50,000, then it may be worth the effort to check the Schedules K-1 for a taxpayer with a large percentage of ownership. If the Schedules K-1 indicate that a taxpayer will receive a large percentage of the adjustment, then a check for special allocations should be made. We should only work a partner if they are going to receive a large enough percentage of the adjustment that it will make it worth our investment in processing.

The significance of the adjustment will vary from case to case depending on the size of the adjustment compared to a partner’s allocation. RAs making the determination must use their best judgment in making the determination. The decision to load or not load should be documented in the case file.

When making a no load determination, you should not attempt to determine if a partner has multiple linkages. If we already have that information, then it should be considered. No load determinations should be made as quickly as possible to avoid loading as many downstream partners as possible.

Making a no load determination is an imperfect process, and decisions will be made based upon the facts at that time. The agent needs to document the case file to support their determination. Incorrect determinations based upon reasonable judgment may occur from time to time. A barred statute report will not be prepared if, based upon new information, a properly documented no load tier or underlying partner is later found to fall above tolerance.

Tier Structuring Tool (TST) and related tools should be used when making the no load determination. These tools can greatly assist in the decision making process.

Generally, a large partnership is considered to have more than 100 direct or indirect partners. The definition of a large partnership may be adjusted locally but must be documented in local procedures.

A PTP is a publicly traded partnership with a very large number of partners. They often have tens of thousands of partners. As a result, it is unlikely that all partners will be impacted significantly by any adjustment made at the partnership level.

A complete evaluation of the potential adjustments should be made before linking the large partnership or any partners beyond the direct level. Contact with the field will be necessary to determine the extent of potential adjustments.

Taxes withheld on a foreign partner’s income under IRC 1441, IRC 1442, and IRC 1446 are considered Partnership items. An examination of a TEFRA partnership with respect to these withholding tax sections is subject to the TEFRA partnership procedures. IRC 6231(a)(3); Treas. Reg. 301.6231(a) (3)-1(a)(1) and (b).

The linkage package must clearly state that the partnership is being linked strictly for pursuing foreign withholding. If foreign withholding is the only issue, then the campus will only link the notice partners. No indirect partners will be linked. The notice partners need to remain open for notice purposes only. This is one of the few exceptions where all notice partners may need to be liked regardless of materiality. Contact your HQ analyst if you have a large number of notice partners and have concerns.

A technical termination can create situations where more than one partnership return is filed in the same month. If the field is examining both returns, only the first return filed in the month will have a TC 150 posting. Subsequent flings in the same month will be reflected as a TC 976. The field will need to establish the short period key cases on NMF and submit separate linkage packages to the CPF if more than one return filed in the same month is examined. If both returns are not being examined and only the TC 976 is being examined, AIMS should be set up on Master File and not NMF, this will prevent closing issues later on. NMF is only needed if both returns filed in the same month are being examined.

Multiple filings in the same month can also result in a subsequent return being filed as a TC 976. If there are multiple filings in the same month, the first return received can be established on AIMS, but only one other year may be established NMF. All returns filed in the same month should be documented in the MF return. The NMF return and all other subsequent filings in that month should be kept together.

IRAs can be partners in a partnership.

Some IRA partners may be subject to excise tax adjustments. The key case examiner should be alerted to submit a specialist referral if the IRA partner will have material adjustments. Adjustments to IRAs will be made as affected item adjustments. The agent will need to inform the campus, if the campus controls the partner, of the result of their referral so statutes can be protected if needed.

If the IRA partner previously filed an excise tax return Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Tax-Favored Accounts, then a partner level statute extension Form 872, Consent to Extend the Time to Assess Tax Attributable to Partnership Items, will be needed. The Form 872-P does not extend the statute for excise taxes. If a consent to extend the statute of limitations is being prepared and an excise tax related to an IRA may be assessed, complete the "kind of tax" line on the consent form, by inserting "income and excise" . The excise tax statute must also be extended in addition to the income tax statute if there is a possibility that an excise tax may be assessed. If the normal individual income tax statute is expired but you have an excise tax statute due to failure to file Form 5329, the individual 1040 (MFT 30) should be controlled with "II" alpha statute code.

A key case administrative file contains the pertinent information related to the key case entity as it relates to the actions in CPF. The key case file can be an RGS electronic key case file or a paper file. RGS files must contain the same information as a paper file and documents should be properly designated so they can be located. Regardless of whether the key case file is electronic or paper. The key case administrative file must include the following:

Key case administrative files must be filed in EIN sequence if paper.

LB&I key case returns and their related Schedules K-1 are processed using LIN and are scanned and stored on-line.

A web link is provided where the data can be accessed. The Schedule K-1 can be accessed using LIN and compared to the taxpayer's return without needing a paper copy.

If a return has a LIN link and is controlled by the CPF, the return should be updated to EGC 5809. LB&I monitors returns in this EGC and it alerts them to send out the web link to the appropriate campus.

If a Schedule K-1 discrepancy is identified, the return should be checked for a statement of inconsistency. If no such statement was filed, the taxpayer will be contacted to explain the discrepant item(s) using Letter 5640 or Letter 5645. If contacting a taxpayer by phone, their identity must be verified. If by phone, see IRM 21.1.3.2.3, Required Taxpayer Authentication, for an example of authentication language. See IRM 21.1.3.9, Mailing and Faxing Tax Account Information, for an example of faxing guideline language.

The taxpayer's response will be reviewed by technical personnel.

If the taxpayer states the loss was divided with and claimed by other taxpayers, a nominee situation exists. Ensure the other nominee partners are linked.

If a material partner does not file a return, the CPF will attempt to secure one from the taxpayer. Letter 729-A, Tax Examiner Request for Delinquent Tax Return, may be sent to obtain an income tax return from the taxpayer. If a direct partner, the CPF may have to refer the case to the examining agent to attempt to secure a delinquent return. The filing date of a partner's return is the beginning of the three year IRC 6501. The IRC 6501 will not be shortened by the earlier running of the IRC 6229.

Multiple steps are taken to secure returns, receive responses related to special allocations, Schedule K-1 Discrepancies and non filed returns. Once all the steps are taken with no success, the cases are treated as unperfected but exhausted. The returns should be placed in EGC 5814 or 5815 for partners or 5862 for tiers. This lets everyone know that the returns are not perfected, but all efforts to perfect the cases have been attempted.

Material tier and BMF cases that are unperfected, with all efforts (Letter, Phone call, 2nd ESTAB) exhausted to obtain all information, will be updated to the Technical Team with a Technical Assistance Request (TAR) signed off by team manager. Ensure all research is included in the case along with detailed history notes on what research was done. A reviewer in the Technical Team will then decide if the case can go to EGC 5862 on Tiers or EGC 5815 on BMF partners. No case should be put in EGC 5862 or 5815 (BMF partners) without a TAR from Technical. This will provide a more accurate number of unperfected but exhausted cases and Tech will know they have already researched them.

IMF cases will be worked a little different then TIERS and BMF. Tax Examiners will send a letter for return or K-1 discrepancy, wait the 6 weeks and then follow up with a phone call. If no response is received then the case will need to be signed off by lead or manager to go to EGC 5814 or 5815. All research and detailed history notes need to be included for IMF also.

Once the key case package is received and OYD has been input, the TE will attempt another letter and phone call before sending to TRW if the case is a change case. No additional attempts will be made for a no change case.

Newly established returns will be established in EGC 5800. Once a case file (folder if paper, RGS if electronic) is created the Schedule K-1 is associated and it should be updated to EGC 5801. All case files will contain a Schedule K-1 unless they are a carryover or carryback year. When the original return is received, or electronic return is secured, the case file will be updated to EGC 5805. If the return is identified as having a LIN link, the case file will be updated to EGC 5809 in order to request the LIN web link. The LIN web link allows you to view the return.

If the TEFRA partnership examination is completed prior to field examination or Appeals completing action on the partner exam issues, the partner CPF will make a partial assessment based on the copy of the return with the partner CPF case file. The partial TEFRA assessment will be made via a computational adjustment and should be sent to the taxpayer with Letter 4735, Notice of Computational Adjustment. Computational adjustments include penalties determined at the partnership level.

If the CPF does not have a copy of the partner return at the time the assessment must be made, a copy will be requested from the examining agent or appeals officer.

A copy of the examination report, any other work papers relating to the pass-through adjustment, and Form 5344, Examination Closing Record, with TEFRA written on the top of the form, will be forwarded to the function working the partner exam issues via Form 6658, Related TEFRA Pass-Through Examination Information. Retain the acknowledged Form 6658 with the CPF partner case file.

The examiner or appeals officer must use the examination report for the TEFRA related adjustments as the starting point when computing the partner exam tax deficiency or overassessment resulting from the exam adjustments.

The field will work any pass-through TEFRA adjustments for TEFRA LB&I partners open or suspended in the field. See IRM 4.31.3.5.8 (5), for partners with no CPF case file for Form 14671 guidance.

For LB&I returns controlled in Appeals, Appeals will prepare pass-through adjustments for corporate returns with an activity code of 219 or above, Joint Committee, and corporate specialty returns, which are any corporate return filed with a Form 1120 followed by a letter (for example, Form 1120-L, U.S. Life Insurance Company Income Tax Return) except Form 1120-A, U.S. Corporation Short-Form Income Tax Return, Form 1120-S, U.S. Income Tax Return for an S Corporation, or Form 1120-X, Amended U.S. Corporation Income Tax Return. See IRM 4.31.3.5.8 (5), for partners with no CPF case file Form 14671 guidance.

For non-corporate LB&I returns controlled in Appeals, pass-through adjustments will have to be computed by the campus and forwarded to Appeals. A CPF partner case file would not have been prepared for a non-corporate return while the case was with LB&I field exam. The partner CPF will need a partner case file to complete a TEFRA partial assessment. Although this is not an SB/SE case the instructions in IRM 4.31.3.5.8.1 are the same for non-corporate LB&I returns that have been transferred to Appeals. Follow IRM 4.31.3.5.8.1 instructions.

When the partner examination is resolved before the TEFRA partnership examination, the partner exam will be closed to Technical Services using normal closing procedures; however, any assessments or refunds are processed as a partial.

Because the partner case has an open PCS linkage (PICF code) or Freeze Code 6 (related return) the partner case file will need to be transferred to the CPF. The appropriate CPF to transfer the case to is determined by the CTF code on CC TSINQI.

Cases being transferred from field exam (PBC 2XX for SB/SE or 3XX for LB&I) will be updated to status 21 and forwarded to the TSPC. After receiving and reviewing the case the TSPC will mark Form 3198, page 2, to transfer the partner to the CPF. The TSPC will update the partner case file to status 51 and forward to Centralized Case Processing (CCP) for a partial assessment on the partner exam issues. After the partial assessment, CCP will close the ERCS database control and will update AIMS controls via CC AMSOC to the designated CPF, PBC 295 (BSC) or PBC 398 (OSC), status code 34, per instruction on Form 3198, page 2. AIMS will automatically update the case to the transfer EGC 5817 (PICF CD) or 5717 (AIMS Freeze Code 6). Paper case files will be transferred via Form 3210 to the CPF. For an electronic case file, the TSPC will prepare Form 15354, Campus Pass-Through Function Electronic Case Transfer Check Sheet and send to the PCS Coordinator in advance of updating to CCP.

Cases being transferred from Appeals (PBC 6XX), the Appeals tax examiner will update AIMS controls via CC AMSOC to the designated CPF per the CC TSINQ print, PBC 295 (BSC) or PBC 398 (OSC) and status code 34. Paper case files will be transferred via Form 3210 to the CPF. If an electronic case file, the Appeals tax examiner will prepare Form 15354, Campus Pass-Through Function Electronic Case Transfer Check Sheet and send to the PCS Coordinator in advance of updating AIMS to the CPF.

The CPF PCS Coordinator should verify the case file is complete and meets the criteria to be added to campus inventory. The PCS Coordinator will transfer to the appropriate CPF Team and AIMS EGC 58XX.

Partners that are Joint Committee, CIC/LCC corporations, or corporate specialty cases will remain with the field group in a suspense status or if in Appeals, will be returned to the field group for suspense until the TEFRA pass-through examination is resolved. See IRM 4.31.3.5.9.1, Field Suspense of SB/SE Partners and IRM 4.31.3.5.9.2, Field Suspense of LB&I Partners.

TEFRA related partner returns that are corporate specialty cases (Form 1120 with letters after the 1120 other than A, S, or X) remain with the field examiner until the TEFRA issue is resolved and the case can close.

The field will also hold all partner returns where the TEFRA statute is controlled at the partner level. See IRM 4.31.2.5.3.1, TEFRA Statutes secured at the Partner Level (AC Statute Procedures).

TEFRA related partner returns that are CIC/LCC corporation, Joint Committee, or other corporate specialty cases (Form 1120 with letters after the 1120 other than A, S, or X) remain with the field examiner. When the only partner issue remaining is the TEFRA issue, the case is generally suspended in status 14 and will remain there until all TEFRA linkages are resolved and the case can close.

The CPF may forward some cases that are not CIC/LCC or Joint Committee if related years are CIC/LCC or Joint Committee. For example, an adjustment is made to an earlier non-CIC/LCC year that impacts an NOL. There are later years impacted by that NOL that are CIC/LCC. The campus will forward those returns to the field to be worked since the earlier year adjustments will impact those later CIC/LCC years.

The field will also hold all partner returns where the TEFRA statute is controlled at the partner level. See IRM 4.31.2.5.3.1, TEFRA Statutes secured at the Partner Level (AC Statute Procedures).

Caution should be used when requesting carryback or carryover returns. These returns should be requested later in the process after the field examination has had time to develop their case. Ordering CB/CO returns too soon results in many returns that need to be refiled, and eats up resources unnecessarily. Waiting to request CB/CO returns until key case adjustments are known ensures that only returns that are needed are ordered.

When partner returns are initially reviewed, carryback or carryover issues should be noted. If the key case adjustments will impact those earlier identified carryover issues, then those returns should be requested. In general, carryback and carryover year returns should not be requested until the key case adjustments are known.

The campus should request and suspend all prior and subsequent partner returns that may be impacted by a partnership level adjustment, unless already controlled on AIMS. The carryback and carryover returns will be held in suspense pending the outcome of the partnership examination. Carryback and carryover years cannot be linked on PCS.

If the field has AIMS control of a potential carryback or carryover return, the campus PCS Coordinator should be contacted to input a Freeze Code 6 to prevent the return from closing. CCP will forward the return to the CPF after processing the partial closure. When it is determined that the carryback or carryover year is no longer needed, or the return is linked and no longer needs the freeze code, the campus PCS Coordinator should be contacted to remove the Freeze Code 6.

When a key case statute is allowed to expire, the statute is changed to an alpha AC. The key case statute protects all statutes of the underlying partners. These partners are typically controlled in the campus and have an HH alpha statute. Letting the key case statute expire means each individual taxable partner's statute must be controlled. When this occurs, all the underlying key case partners will be transferred to the agent examining the key case. The HH will be removed, and the statute will be updated to the current numeric statute before the case is forwarded to the field.

An ELP may be a tier. If an ELP is a tier, all adjustments will be addressed at the partnership level.

In the event the ELP ceases to exist at the time the adjustments are determined, then the adjustments are passed through to the underlying partners per the build out.

For a partner level POA, Part I, Line 1 of Form 2848 should reflect the partner’s tax information. This includes the partner’s name, address, and TIN. If partner Jane Doe is executing this type of POA, Part I would include Jane’s name and address and Jane’s TIN.

Figure 4.31.3-1

Example of Form 2848, Part 1, TEFRA Partner POACompleted Form 2848, Part 1, Line 1 which shows Jane Doe’s name, address, TIN and phone number.

Please click here for the text description of the image.

Under Description of Matter, "Income, Including TEFRA Partnership Items" should be entered. Under tax forms, the partners federal tax from number (Form 1040, Form 1120, etc.) should be entered as well as Form 1065. Under Year(s) or Period(s) the applicable years should be listed.

If an existing POA does not have the proper language or cover the correct tax periods, a new POA, with the statement in (1) or the correct years included, should be secured. The years on the POA need to include the tax period of the key case partnership as well as the partner’s tax period. Considering fiscal year filing and tiering levels, the partner may not be aware that the key case tax period is different from their own. The POA needs to be reviewed upon receipt to ensure the appropriate years are included. A correct POA may have to be requested from the taxpayer.

Figure 4.31.3-2

Example of Form 2848, Part 3, TEFRA Partner POAA completed Form 2848, Section 3, with "Income, including TEFRA Partnership Items” under Description of Matter, a description of what needs to be added is included which states ”Partner’s Federal Tax Form (1040, 1120, etc.) and Form 1065” under Tax Form Number and ”Applicable Tax Years” under Year(s) or Period(s).

Please click here for the text description of the image.

The language in (1) exhibit meets the requirements of Treas. Reg. 301.6223(c)-1(e). This means the Form 2848 covers TEFRA as well as income tax. In the Jane Doe example, Part 3 Tax Form Number, would list both Form 1065 and Form 1040.

Though not required, under Part 5a of Form 2848, it is a best practice to list each act the taxpayer authorizes the POA to perform. These would be acts other than the normal authorization to work with the examiner and exchange confidential information.

Figure 4.31.3-3

Example of Form 2848, Part 5a, TEFRA Partner POACompleted Form 2848 part 5a, with “It is a best practice, but not required, to list specific acts authorized by the taxpayer.”

Please click here for the text description of the image.

Care should be taken to identify any restrictions to the POA’s authority to act for the taxpayer under Part 5b.

Figure 4.31.3-4

Example of Form 2848, Part 5b, TEFRA Partner POACompleted Form 2848 part 5, with “Care should be taken to identify any restrictions to the POA’s authority to act for the taxpayer”.

Please click here for the text description of the image.

Form 2848 should reflect the partner’s signature and printed name.

Figure 4.31.3-5

Example of Form 2848, Part 7, TEFRA Partner POAThe example of Part 7 the Form 2848 shows the signature of Jane Doe on the Signature line. Printed Name is “Jane Doe”.

Please click here for the text description of the image.

An untimely notice when the proceedings are still ongoing can occur when there is less than 120 days on the partnership statute and the field wants to begin an examination. This requires the NBAP, FPAA and Letter 3857, Untimely Notice Letter (TEFRA Proceedings Ongoing), to be issued at the same time. It is possible to have this situation if a partner was inadvertently not sent an FPAA within 60 days of the TMP FPAA. In this instance, the partner FPAA and the Letter 3857 should be sent together.

The Letter 3857 notifies the partner of the untimely notice and provides them an opportunity to

The election must be filed within 45 days from the date they received their FPAA. The election must be completed as explained within the Letter 3857.

If no election is filed, the partner will remain part of the TEFRA proceedings.

If an election is filed, the one-year assessment period will begin on the date the FPAA was mailed to the partner. The TEFRA indicator needs to be removed from PCS. A statutory notice of deficiency must be issued and assessed during the one year period. When the statutory notice is issued the Report Package Indicator needs to be updated to "S" .

An untimely notice when the proceedings are complete can occur when a partner wasn’t provided an FPAA on a case that got petitioned. After the court decision is entered, but before the expiration of the OYD we discover that no FPAA was issued. This requires the FPAA and Letter 3858, Untimely Notice Letter (TEFRA Proceedings Complete), be issued at the same time.

The Letter 3858 notifies the partner of the untimely notice and provides them the opportunity to file an election to have their partnership items treated according to:

The election must be filed within 45 days of the date they received their FPAA. The election must be completed as explained in the Letter 3858.

If no election is filed, the partner’s partnership items will convert to nonpartnership items. A one-year assessment period will begin on the date the FPAA was mailed to the partner. The TEFRA indicator should be removed from PCS. A statutory notice of deficiency must be issued and assessed during that one year period. When the statutory notice is issued the Report Package Indicator needs to be updated to "S" .

If an election is made, the partner’s return will be adjusted using the election option they chose. A one-year assessment period will begin on the date the FPAA was mailed to the partner. The adjustments will be made using normal TEFRA procedures.

The docket list should be monitored by the CPF to determine if a partner has filed a petition in the United States Tax Court. The CPF should also be sensitive to other indications that a petition has been filed, e.g., an AIMS update of the key case to a status 8X.

Technical Services or Appeals (whichever organization initiated the FPAA) will notify the CPF that a petition was filed. If the CPF receives a copy of the partner's filing, other than from Technical Services or Appeals, it will be forwarded to Technical Services or Appeals to be associated with the key case file. A copy will be retained for the campus key case administrative file. If less than 15 days remain on what would be the default date for the FPAA, a copy of the petition (without any attachments, if any) will be faxed to Technical Services or Appeals.

When the CPF receives notice from Appeals or Technical Services that a petition was filed, the key case file will be noted to reflect the docketed case status. The docket number will be input on the PCS using CC TSCHG, item number 28. The campus key case administrative file remains open pending the outcome of the court case.

If the Tax Court decision is appealed, the case is not “final”, however the partners may be assessed after the 90 day period has elapsed.

By appealing the Tax Court decision, the case is like a refund litigation case in that the partners are looking to reduce or eliminate a Tax Court decision that increases the partner's tax liability. The assessments are processed as partial assessments like petitions originally filed in District Court or the Court of Federal Claims. The key case and partner cases remain open pending the resolution of the appeal process.

If a bond is posted in an amount equal to the entire amount of the increase in the tax liability from the Tax Court decision, the assessment may be delayed until all appeals have been exhausted.

If no bond is posted, Form 14298 will request that the CPF assess the partnership items in accordance with the Tax Court decision. Since the Tax Court decision is not final, the one-year assessment period has not begun. Although the one-year assessment period has not begun, a one-year statute date is computed by adding one year to the date the appeal was filed. This forces the partner cases to appear on the PCS Report 4-4 and they should be worked as expeditiously as possible.

The Tax Court decision appealed closing package includes the following:

The following additional items should be notated when preparing the closing package for the partner file:

The key case remains open on AIMS and the "H" freeze remains on AIMS pending a Court Decision Finalized closing package. The 18 month period for filing the key case administrative file in the closed key case files does not begin until the litigation is final, and a final court decision package is received.

The key case CPF will note the key case administrative file to reflect the docket status and input the docket number on the PCS using CC TSCHG, item number 28. Use PCS Special User Message, TSCHG 07, to notate the applicable court jurisdiction (“Received Tax Court Decision Appealed”).

Under the unified proceedings, partners may file a petition directly with either a district court or the U.S. Court of Federal Claims and gain direct access to that court. However, if either of these courts is used, each partner who files the petition must make a deposit equal to the amount their tax liability would be increased if the adjustment in the FPAA were fully sustained.

The petitioner may bring or mail in a deposit to any function within IRS. It doesn't matter if the deposit is sent to the field, the campus or Appeals. The check should include the TIN, tax period & that it is a bond to go to district court. An accompanying letter is nice but not required.

If an action is brought in district court or the U.S. Court of Federal Claims, only the petitioning partner is required to make a deposit. The Service will assess and collect the tax deficiency against all partners (petitioning and non-petitioning) who have an interest in the proceeding (partnership items haven’t converted to nonpartnership items), including penalties and interest. The deposit may be applied to the assessment of the petitioning partner. No partial assessments stemming from the petition may be made prior to the close of the 150th day after the day the FPAA was mailed to the TMP.

When the CPF is notified of a petition filed with a district court of the United States, or the United States Court of Federal Claims, the key case is treated and processed as if the FPAA had defaulted. The key case AIMS is updated to status code 90 so the partner assessments may be billed and collected. In order for AIMS to be closed, the "H" freeze must be removed. These procedures are similar to the refund litigation procedures applicable to claims.

Petitioned District Court and Court of Federal Claims closing package includes the following:

The following additional item should be notated when preparing the closing package for the partner file.

See IRM 4.31.4 of this Handbook for the procedures for petitioned AARs.

The key case AIMS is updated to status 90, but the 18-month period for refiling the key case administrative file in the closed key case files does not begin until the litigation is final and a final court decision package is received.

The key case CPF will note the key case administrative file to reflect the docket status and input the docket number on the PCS using CC TSCHG, item number 28. Use PCS Special User Message, TSCHG 07, to notate the applicable court jurisdiction ("Received Petitioned District Tax Court" , "Received Petitioned Court of Claims" , etc.)

The key case CPF will receive notification from Appeals (or in a rare instance from Office of Chief Counsel, per CC Notice 2011-11) that a decision was entered with respect to a docketed case.

The court settlement (stipulated decision) or court decision package will include:

When the package is received it will be reviewed by the key case CPF who will acknowledge receipt within five days.

The one-year assessment statute date will immediately be input on the key case partners and all related tiers using CC TSCHG or MSCHG item 05.

After all partner packages have been forwarded to the partner’s CPF, and when applicable the field group or Appeals, the court decision package received from Appeals, (or in a rare instance the Office of Chief Counsel, per CC Notice 2011-11) is associated with the campus key case administrative file, which is so noted. For final key case actions see IRM 4.31.3.14, Key Case Administrative File Suspense.

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 that is consistent with another partner’s settlement.

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/it is requesting consistent settlement. The request shall be submitted to the office that entered into the settlement. Treas Regs 301.6224(c)-3.

The consistent settlement will be processed on Form 870-PT and identified as "Consistent Settlement" . "Consistent Settlement" should be written on the top of the agreement form.

The key case examiner may receive a signed Form 870-PT or Form 870-LT from the partners in the key case. These will be transmitted with the RAR to the TSPC for acceptance by the Commissioner.

The Forms 870-PT or 870-LT will be forwarded by the TSPC to the key case CPF within 5 days of execution.

Packages are submitted to the CPF with Form 14434, Tax Equity and Fiscal Responsibility Act (TEFRA) Notice Package Check Sheet. The TSPC will forward the counter signed agreements using the shared drive within 5 days of execution. The agreed closing package includes the following:

The CPF will complete the following actions for agreed packages:

All Forms 870-PT or Forms 870-LT (60 day letter only) and the schedule of adjustments received by the CPF that come directly from the partners after the issuance of a 60 day letter or FPAA must be screened for altered documents or taxpayer initiated requests for settlement. The schedule of adjustments from the campus key case administrative file must be compared to the schedule of adjustments received from the partner. If discrepancies exist, the agreements cannot be executed.

All Forms 870-PT or Forms 870-LT will be executed for the Service by an RA, GS-12 or higher (per Delegation Order 4-19), within five days of receipt in the key case CPF. Under no circumstances, other than a short statute, should a Form 870-PT or Form 870-LT be executed by anyone other than the key case CPF.

If the key case is in docketed status, coordinate with Appeals or Area Counsel.

Process any accepted Form 870-PT or Form 870-LT as stated in the text of IRM 4.31.3.7.3.5, which outlines actions taken by the CPF on agreed packages.

The appeals officer may receive a signed Form 870-PT(AD) or Form 870-LT(AD) from the partners in the key case. These are signed by the Appeals Team Leader or Appeals Team Case Leader for acceptance by the Commissioner.

Packages are submitted to the campus with Form 14298, Appeals TEFRA Electronic Notice Package Check Sheet within 5 days of execution. The entire package (countersigned Form 870-PT(AD)/Form 870-LT(AD), Form 886-A, Form 4605-A, Form 886-Z (or equivalent spreadsheet), and Form 5402) should be forwarded to the appropriate CPF using the shared drive.

Process any accepted Form 870-PT(AD) or Form 870-LT(AD) as stated in IRM 4.31.3.7.3.5(4), which outlines actions taken by the CPF on agreed packages.

A Form 870-PT(AD) or Form 870-LT(AD) and the schedule of adjustments received by the CPF that come directly from the partners must be screened for altered documents or taxpayer initiated requests for settlement. The schedule of adjustments from the campus key case administrative file must be compared to the schedule of adjustments received from the partner. If discrepancies exist, the agreements can’t be executed.

All Forms 870-PT(AD) or Forms 870-LT(AD) will be executed for the Service by a Revenue Agent, GS-12 or higher, per Delegation Order 4-19, within five days of receipt in the key case CPF. Under no circumstances, other than a short statute, should a Form 870-PT (AD) or Form 870-LT (AD) be executed by anyone other than the key case CPF.

Process any executed Form 870-PT (AD) or Form 870-LT (AD) as stated in IRM 4.31.3.7.3.5(4), which outlines actions taken by the CPF on agreed packages.

In a docketed case, the settlement agreement could be a Form 870-PT or partner Form 906. Process the settlement agreements as stated in IRM 4.31.3.7.3.4, Settlement Agreements Received by Appeals.

Generally, agreements must be signed by the partner of the key case partnership. Determining who can sign may be tricky in some circumstances. If there is any doubt on who should be signing an agreement, contact the TSPC . See IRM Exhibit 4.31.2-4 for additional information about who should sign the agreement.

For tax years beginning before June 28, 2002, parent corporations that are part of a consolidated group must sign agreements of subsidiary partners. Even if the subsidiary is the partner, the parent must sign since any tax will ultimately impact the parent's return. The format for the name on the parent's agreement will read, XYZ Corporation, on behalf of consolidated group including ABC Subsidiary.

For tax years beginning on or after June 28, 2002 (see Treas. Reg. 1.1502- 77), agreements secured from consolidated groups for partnership and affected item adjustments, should have both the subsidiary partner’s and its parent’s signatures on the waiver. If a subsidiary, who is the actual partner under state law, insists on being the sole signatory on the waiver, the examiner should contact local area Counsel before executing the waiver. A subsidiary partner that is the TMP can solely sign an agreement as TMP in order to bind non-notice partners.

If there is a subsidiary partner, or multiple subsidiary partners with the same parent, then only the parent needs to sign the agreement. The exception is if the parent entity no longer exists and the subsidiaries are the only parties left to assess. In that case we would need to link the subs and secure agreements from all the subsidiary partners.

For partners who are non-subsidiary corporations, trusts, or partnerships, the agreements should be signed by an authorized corporate officer, trustee, or general partner authorized to bind the partnership under state law, respectively. The title of the person signing should be included on the appropriate line on the agreement form.

Trustees signing on behalf of a trust must complete a Form 56, Notice Concerning Fiduciary Relationship, to declare their eligibility to sign as the beneficiary. If the beneficiary trustee is signing the form to bind only themselves, then no Form 56 is needed.

When countersigned agreements are received by the campus or countersigned by campus personnel, Letter 2398, Partnership Settlement Notice, will be completed along with a listing of the taxpayers who settled and their date of settlement. The letter and listing are used to notify the TMP as to what partners have agreed so the TMP can meet the legal obligation under Treas. Reg. 301.6223(g)-1(b)(1)(iv). Use Letter 1908, Transmittal Letter Agreed Form 870-PT, to send a copy of the countersigned agreement back to the partner for their records. If the partner's Letter 1908 is returned as undeliverable, the campus should research for a current address.

Consents to assess additional tax (Form 4549, Form 870, and others) can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax.

Closing agreements involving tax amounts can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax.

Consents to extend the statute of limitations for assessing tax (Form 872, Form 872-P, and other consent forms) can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the extension by fax.

Closing packages that have agreements along with investors that will be no changed will be closed with "Other" checked on the Form 14434, Tax Equity and Fiscal Responsibility Act (TEFRA) Electronic Notice Package Check Sheet. This can happen when there are partners with zero percent ownership, or where linked partners will not be subject to an assessment and agreements cannot be secured.

The partners where agreements cannot be secured will be closed no change and a copy of the package put on CEAS. The earliest OYD will be used for the no change partners.

When the investors with no agreements are closed on AIMS, they will be closed using disposal code 01.

When a partnership filed AAR results in a refund, it may not be practicable for the campus to process the refunds. In those situations, the campus may send a Letter 4505-A to the partnership TMP. The TMP will then be required to provide amended Schedules K-1 to all partners and instruct the partnership to inform their partners that they may file amended returns. The partners' amended returns should include:

When a partnership exam results in a refund, it may not be practicable for the campus to process the refunds. In those situations, the campus may send a Letter 4505-E to a tier partnership. This will instruct the partnership to inform their partners that they may file amended returns. A Form 886-A showing the tiers allocation of the adjustment must be included with the Form 4505-E .

The partners' amended returns should include:

The Letter 4505-E may be issued directly to the TMP, or it may be used at a lower level within the partnership structure.

The Letter 4505-E does not have to be sent to all tier partnerships at a particular level. It may be practicable to work some tiers and not others because certain tier partnerships have too many partners to work.

When the Letter 4505-E is sent to the TMP, no other partners will be provided a notice. The letter instructs the TMP to provide their partners with amended Schedules K-1 so they amend their returns.

Upon assignment, the report writer should check the case file to determine if it includes the following items:

The Report Writer should review the Closing Package by verifying the partner’s profit percentage on Form 4605-A to the percentage identified on the related partnership Schedule K-1. Math verify the adjustment amount, which is the difference between "as reported" and the "corrected figure" on Form 4605-A and compare to the amount on Form 886-Z (or equivalent spreadsheet). In addition, a complete review should be done of the entire Closing Package for any other information that would need to be included in the report of adjustments being issued to the taxpayer i.e., basis, at-risk, penalties, special allocations, etc. This information should be included on Form 886-Z (or equivalent spreadsheet), but could be found anywhere in the closing package.

Only the material partners need to be listed on the Form 886-Z (or equivalent spreadsheet) along with an "other partners" section to account for the remaining adjustment. Cross-reference this information from Form 886-Z (or equivalent spreadsheet) with the partner's Schedule K-1 for discrepancies.

Both Form 886-Z (or equivalent spreadsheet) and Form 4605-A should have the same corrected amounts.

The report writer also needs to verify whether or not IRC 6404(g) applies. The IRC 6404(g) date, if applicable, should be identified in the closing package.

Agreed packages with Form 870-PT, 870-LT, 870-PT(AD), or 870-LT(AD) included need to have a notation as to whether the agreement was received from a 60 day letter or an FPAA. This information is necessary to ensure the report writer has the information needed to determine the correct disposal code. Without that information, the report writer has no way of knowing whether the agreement form was secured via a 60 day letter or an FPAA.

If any of these items are not present in the partner case file, the report writer must secure the information necessary for the preparation of the examination report. Depending on the statute, this may require returning the case file to another unit to secure the necessary information.

The report writer must verify that the one-year assessment statute date is correct.

For agreed packages, the one-year assessment statute date is one year from the date the Form 870-PT, 870-LT, 870-PT (AD), or 870-LT (AD) was executed.

For defaulted FPAA packages, the one-year assessment statute date is one year plus 150 days from the date the FPAA was mailed to the TMP.

For court decisions, the one-year assessment statute date is no less than one year from the date the decision become final. The date the decision is final is the date the decision is entered plus the applicable waiting period as mentioned in IRM 4.31.3.11, One-Year Assessment Dates.

If the IRC 6229(a) statute is barred, a Form 3999-T should be in the CPF key case administrative file. A copy of the Pattern Letter(s) P-430 and/or P-431 (pro-forma) should be in the barred statute package received from the key case area.

A partner barred statute package will be prepared for the partner CPF, if any. The package will include a legible copy of Pattern Letter(s) P-430 and P-431, if applicable. See examples in IRM 4.31.2.5.2.1, Barred Key Case Partnership Statutes.

The report writer must determine whether penalties and/or affected items were recommended for the key case.

IRC 6751(b) requires that penalties be approved by a manager before they are assessed. Penalties determined at the partnership level should have been approved in the field before the closing package was submitted to the campus. Any penalties that the campus believes should be applied at the partner level should be approved by campus management before they are applied.

Penalties determined at the partner level will be included on the statutory notice of deficiency. The application of the penalties should be clearly stated on the affected items report.

The report writer will reconcile the Schedule K-1 to the return.

If the taxpayer has not reported income or loss consistent with the Schedule K-1, and has not responded with information, which explains the difference, a direct partner should be referred to a campus RA for consideration of the IRC 6662 penalty. The penalty can only be applied to a direct partner if the IRC 6501 statute is still open.

If, due to the complexity of the case, an employee believes that they cannot adequately prepare a partner audit report, the employee should consult with the Campus TEFRA Coordinator. The Campus TEFRA Coordinator will provide the employee with assistance, or work with the appropriate Headquarters Analyst in order to have the case worked in the field. Campus personnel should make every effort to work all campus controlled partners at the campus. However, there are times when the complexity of the case will require assistance from the field. It is the complexity of the issues, and not the size of the case, that will dictate whether a case gets sent to the field.

Tier partners can request to pay the tax due for all underlying partners. When such a request is made, the tier return must be transferred on AIMS to the examiner or appeals officer controlling the key case. An “H” Freeze should be added to the tier partnership to ensure it does not close prematurely and that a closing package is received.

The field agent or appeals officer will need to work with their local counsel to secure a Form 906, and secure payment.

When payment is secured, the CPF will be notified to close the underlying partners.

A Tier 906 closing package will be sent to the CPF from the TSPC or Appeals TEFRA/BBA Team. The partners of the tier partnership will be closed as agreed cases.

The partner return will normally be adjusted to reflect the corrected amount shown on the Form 886-S, Form 886-W, or Form 886-Z (or equivalent spreadsheet), unless the adjustment document reflects an allowable loss and the partner did not report the loss from this pass-through return on the original return.

TEFRA report writing is unique in that a separate report will be issued for each linkage if they close at different times. This is done so as not to jeopardize the separate one-year assessment statute dates. Each report is prepared based on the income as adjusted on the prior report.

The Form 4549-A, Report of Income Tax Examination Changes (Without Taxpayer Signature) should list each issue and the name and EIN of the partnership from where the adjustment came. The name provides a unique identifier to help the taxpayer understand where the changes came from. It also provides clarity when there are multiple partnership adjustments, or the partner is indirect.

Assessments must be made as soon as possible after the completion of the Form 4549-A. If there are affected items, other linkages or carryover from a prior year that prevent a full closure from being made, a partial assessment will be made.

Form 8339, PCS Change, is used to update the one-year assessment statute date on PCS and to enter the amount of any partial assessment that is being made. A separate Form 8339 will be prepared for each linkage. In addition, more than one Form 8339 may need to be prepared if the partner's assessment is attributable to adjustments from more than one key case even if they go through the same direct linkage.

Each time a report is written, the report writer will determine whether a partial or complete closure should be made.

All reports sent to taxpayers must be sent with a Letter 4735, Notice of Computational Adjustment. Letter 4735 should be sent regular mail, and should generally be sent before or the same day assessments are made.

When return adjustments are too complex for the campus to work, LB&I Tax Computations Specialists (TCS) may be used to assist with preparing these reports.

LB&I has designated two TCS teams to work with the campus on complex cases. Contact information can be provided by HQ TEFRA Analysts.

The campus will maintain AIMS control of the return as well as the statute responsibility.

The campus will scan the portions of the case file needed to prepare a report and send them to the TCS. The TCS will prepare the report within 30 days and return it to the campus.

If the statute will expire within 60 days, contact should be made with the TCS before sending the returns. It may be necessary to make a protective assessment.

The report writer will generate a Form 4549-A, Report of Income Tax Examination Changes (Without Taxpayer Signature), if the taxpayer has signed Form 870-PT, Form 870-PT(AD). Any Form 4549-A must include the name, telephone number and the unique identifying number of the person to contact.

Affected Items are handled similarly. Affected items must be agreed to by signing Part II of Form 870-LT or Form 870-LT(AD), or through deficiency procedures. Affected item agreements, Form 870-LT, are provided with a 60 Day Letter. Affected items are not under the jurisdiction of the courts with regard to partnership proceedings and are not provided with FPAAs. If Part II of the Form 870-LT is not signed, the affected items may be protested or petitioned using deficiency procedures after the partnership proceedings are complete. Any partners subject to affected items and/or partner level penalties will be noticed using deficiency procedures and be sent Letter 525-D, 30 Day Letter Related to Pass-through Entity Examination, or Letter 531, Notice of Deficiency, Form 4549-A and Form 4089-B, Notice of Deficiency - Waiver, to secure signatures.

Partners that file a petition for affected items will be updated and sent to Appeals within 15 days.

The following table will help explain how penalties or affected items are agreed to by the taxpayer and which Form 870 is appropriate.

Each agreement needs to be reviewed carefully to determine the procedures to use. An FPAA is only issued with a Form 870-PT. Any affected items or partner level penalties must be agreed to separately from partnership items using deficiency procedures with Letter 525-D, 30 Day Letter Related to Pass-through Entity Examination, or Letter 531, Notice of Deficiency. 30 day letters should only be issued if more than 90 days remain on the One-year Assessment Date statute. Although not a requirement to issue a 30 day letter the taxpayer should be given the opportunity to be heard in Appeals rather than Tax Court.

All reports sent to taxpayers that address computational adjustment must be sent with a Letter 4735, Notice of Computational Adjustment. Computational Adjustment, include penalties determined at the partnership level. The RAR should include the following statement when such penalties apply: "During the TEFRA unified proceedings, it was determined that the addition to tax under IRC (penalty code section) will be asserted on any partner-level liability resulting from the partnership-level proceedings. Partner level defenses to such penalties can only be asserted through refund actions following assessment and payment. See the attached Form 886-A, Explanation of Items."

When affected items or partner level penalties will be assessed after the computational adjustments are processed, a new OYD will be entered on to PCS. This is done by overlying the 11111111s with the new OYD followed by the closing code and a "P" . These entries are completed in sequence on the same Form 8339 (TSCHG, item 05).

The "P" is the Penalty Assessment Indicator. The penalty/affected item report indicator is displayed on PCS reports and TSINQ and TSUMY screens immediately after the one-year assessment statute date, i.e., MMDDYYYYXP (04151998XP) (Where X = the Investor Closing Code) See IRM 4.29 3.3.1.1.2, Penalty Assessment Amount.

The affected item/ partner level penalty report indicator "P" identifies one-year assessment statute dates that are present only for affected items, or partner level penalty purposes. When the indicator is present, it alerts the CPFs to the fact that the one-year assessment statute date is for an affected item and/or partner level penalty issue, and that the TEFRA tax adjustment issue is already complete. The indicator causes affected item/ partner level penalty records to sort to separate pages on PCS Report 4–4, and that allows monitoring of the affected item/ partner level penalty one-year assessment statute dates separately from the TEFRA one-year assessment statute dates.

See IRM 4.31.3.11.2, Updating the OYD when Issuing Notices of Deficiency, for determining the new OYD after issuing a statutory notice of deficiency. It is important to note that this new date only applies to the affected item adjustments and does not cover any computational adjustment amounts that should have been assessed from the original OYD.

When issuing a SNOD to a partner due to affected items or if assessing penalties determined at the partner level, an "S" should be input as the report package received indicator.

If a protest is received in response to 30 day letter for affected items the report writer must determine the correct statute date. Appeals require a minimum of 12 months on the statute when the case is received. In order to consider the transfer time at least 13 months should remain. If the IRC 6501 statute (ASED) is longer than the OYD then IRC 6501 date should be considered. If the IRC 6501 date is less than 13 month or has expired and the relied upon statute is the IRC 6229 One Year Statute Date, then a statute extension Form 872, Consent to Extend the Time to Assess Tax, should be requested.

The Form 872, statute extension must be received and executed prior to the expiration of the IRC 6501 or IRC 6229 statute date.

The statute date (ASED) and OYD should be updated to the extended date prior to forwarding the case to Appeals. Update the OYD using the procedures in IRM 4.31.3.11.2.

All partnership item adjustments (computational adjustments) must be made before forwarding the affected item protest to Appeals.

Perfected protests of affected items must be updated and sent to Appeals within 15 days.

In the case of an individual who files a return on or before the due date for the return (including extensions), the Service has 36-months (18 months effective for tax years where the 18 month period ended on or before November 25, 2007.) beginning on the later of:

If notice is not provided to the taxpayer before the close of the 36-month period, (18 months for notices issued on or before November 25, 2007.) then the imposition of any interest, penalty, additions to tax or additional amounts that are calculated by reference to the period during which any failure relating to the return is suspended.

The term "suspension period" means the period:

The exceptions to the general rule for suspension of interest and certain penalties where the Service fails to contact the taxpayers are:

The notice date must be annotated on the Form 886-Z (or equivalent spreadsheet) of the partner closing package prepared by the CPF, and also annotated on the partner's Examination Report in the "Remarks" area with the following statement: "IRC 6404(g) does apply and notice was provided on (mail out date)."

The earlier of the date the 60 day letter was sent to the TMP or the date the FPAA was sent to the TMP will be the IRC 6404(g) date. That date will apply to all notice or non-notice partners directly or indirectly invested in the partnership.

In the event that partners agree before any notices are issued, the execution date of the settlement agreement will be the IRC 6404(g) date.

TC 971 with Action Code 064 will be input on Master File for the identified cases to record the notice date. Master File will automatically compute the interest with only one notice date. Cases with additional notice dates will require manually computed restricted interest (TC 340).

All IRC 6404(g) cases where an assessment is being made will require special instructions on Form 3198. If another assessment is necessary, it must again be stated whether IRC 6404(g) applies, and if it does, the notice date for the subsequent assessment must be entered in the "Special/Restricted Interest Features" section of the Form 3198.

In addition to IRC 6404(g) interest suspension, if the partner has made payments or has a credit election in anticipation of a TEFRA adjustment (Master File Account with TC 830 or TC 836) then May/Sequa interest calculations are required. See IRM 20.2.5.7, Revenue Ruling 99-40, Use of Money. The “Special/Restricted Interest Features” section of the Form 3198 should be notated.

The report writer will complete Form 4700-T, Examination Workpapers, on all cases to reflect the partner's applicable adjustment from the examined partnership. Workpapers must be appropriately annotated by the report writer to include all actions taken and how conclusions were reached to prepare the partner report. The following items should be included on the Form 4700-T:

Ensuring all adjustments are fully documented is extremely important if results are ever questioned and the burden of proof becomes an issue.

The Form 4700-T is available in RGS and should be used and maintained there. If there is also a paper case file, the report writer will attach Form 886-S, Form 886-W, or Form 886-Z (or equivalent spreadsheet), and other documents received from the key case CPF to the Form 4700-T as part of the workpapers.

Innocent spouse requests for relief from TEFRA proceedings will be considered only after there is a final determination concerning the treatment of partnership items (e.g., a settlement is entered into, or the decision of the court becomes final). In addition, an innocent spouse request for relief will be considered for each assessment made, rather than limiting requests to one for each tax year. See Examination, Issues and Procedures, Innocent Spouse on Knowledge Management or IRM 25.15 , Relief for Joint and Several Liability.

Examiners need to ensure that all applicable forms are completed when computing the PAL adjustments. The Form 8582, Passive Activity Loss Limitations, worksheets do not need to be completed for all cases, but should be completed when needed. For example, they should be completed to communicate changes to the taxpayer in the case of dispositions or PAL carryovers.

Case files for carryback and carryover years need to have copies of the workpapers from the source year supporting and documenting the adjustments. Adjustments such as Schedule A (contributions), NOL, possibly credits and PAL Credits would also require the closing documentation from the source year and computations for any carryback or carryover. Case files may be electronic as long as they are maintained on an enterprise system (e.g., CEAS) that is archived so the data can be accessed later.

When there are PAL carryovers, for example, the case files for those years need to have all of the necessary work papers to support the PAL adjustment. The carryover case file should have the closing documents from the source year as well as the Form 8582 reflecting the PAL carryover changes. Without the source documentation, there is nothing in the carryover year file to support the changes. This information is necessary in the event a subsequent taxpayer inquiry is made.

When making adjustments to tax year 2018 or later campus controlled Form 1040 investor returns linked to ILSC key case closures, the CPF will have to consider QBID.

The CPF will review the investor return to determine if the investor claimed a QBID on their original or subsequently filed tax return, currently found on page one of the Form 1040. The same process will be followed for Form 1041 taxpayers who claim a QBID deduction on their originally filed return. For 2018, QBID was reported as an "other deduction", but later years have a QBID line on page one.

When applying these procedures, any adjustment to QBI items included on key case examination reports will be disregarded by CPF in lieu of the following procedures:

When applying the procedures above, any adjustment to QBI items included on key-case examination report (Form 4605-A) by the examining agent will be ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. Following the above procedures will ensure the QBID adjustments are computed consistently.

If the taxpayer corresponds with Examination Field Support in response to the Form 14997, employees will review the information provided by the taxpayer and consider the proposed adjustment to QBID in light of the additional information received. If an adjustment to the QBID is warranted, the employee will make the adjustment in RGS using the issue established in paragraph (3), inputting the corrected value in the per exam field of the "Net qualified business income deduction" categorization.

After completion of the required reports, Form 4549-A or Form 4549 (affected items or prior nonTEFRA) and closing documents, Form 5344 and Form 8339 (if return is linked on PCS), the report writer should prepare the case for processing by clerical personnel. A complete case file, paper or electronic RGS file, should contain the following documents:

The report writer will indicate on the history sheet what letters should be issued or any additional actions that may be required. The history sheet will also indicate the appropriate closing action. The report writer is responsible for instructing clerical and closing operators of the appropriate actions required based on the type of closure.

If AIMS, page 2, displays "RET-NOT-REQ" and there are no original documents that must be returned to files the investor case can be closed paperless, providing all required documents are stored in the RGS case file. Use blocking number 40X.

If AIMS, page 2, displays "RETURN REQUESTED" and all required documents are stored in the RGS file, transmit Form 13181, Examination Report Generation Software (RGS) Closing Information Cover Sheet, to files in place of a paper file and close with block number 08X or 38X. Any original documents that must be returned to files can be attached to the Form 13181. All other documents, that are copies of documents found in the RGS case file may be destroyed.

IRM 4.4.18.5, Over $10 Million Deficiency, should be followed when adjustments result in a Balance Due (this includes interest and penalties) over $10 million.

Each year stands alone when determining the $10 million threshold.

For each tax period, where the Balance Due (this includes interest and penalties) is $10 million or more, the report writer will prepare a copy of the Form(s) 4700-T, and the examination report(s) to be sent to the Office of Unpaid Assessment Analysis.

Each CPF will use PCS and AIMS reports to monitor linked returns. Specific information is provided on PCS reports in IRM 4.29, Partnership Control System (PCS) Handbook. The CPF personnel should use the PCS Handbook if they have questions about PCS generated reports. Information on AIMS reports is provided in IRM 4.4.27, AIMS Processing - Reports.

The campuses should also use SSIVL and ORCAS reports to monitor their returns and statutes.

Cases in status code 34, Employee Group Code 58XX, or with a "T" indicator will be included on the CPF PCS reports. These three criteria, although not all three for every report, are also used to determine CPF staffing levels and for specific measurements.

TEFRA related partner or shareholder returns that are in area office possession for examination of nonpass-through issues will not be in the CPF physical inventory.

AIMS 4.0, Statute Control Report, is a monthly report with documentation requirements that is to be maintained for three years. See IRM 4.4.27.5.1.1, Procedures for Working Statute Control Report and IRM 25.6.23.5.6 Campus Statute Controls - Corr Exam and CPF.

PCS Report 2-2, is the weekly Report Writing TEFRA inventory.

PCS Report 4-4, lists all CPF investor records that have a TEFRA one-year assessment statute date present on a linkage record. Key case information for linkage records with a one-year date present is displayed to the right of the investor record information.

PCS Report 5-3, is Investors with new ILSC Linkages. Lists returns in status code 34, employee group code 58XX to which a ILSC linkage has been added within the past three weeks.

PCS Report 5-4(I), is a listing, for the key case CPF, of investors that match AIMS weekly updates for bankruptcy, Criminal Investigation, Disaster Related, Combat Zone, and potentially dangerous taxpayer (PDT) transactions.

PCS Report 5-5, lists key cases that are in status 90 that have linked investors without a one-year assessment date.

PCS Report 21-3, lists TEFRA key cases, by Primary Business code within the campuses jurisdiction, when the TEFRA key case record enters status code 27, 28, 29, or 80 and above for the first time. This gives the CPF an alert that key case adjustments have been finalized and will be moving into the notice phase.

PCS Report 22-3, National Directory Field/CPF.

CCA 42-43, IDRS Overage Report (ORCAS) age listings. The following table provides additional information found on the ORCAS report and monitoring responsibility.

Accomplishments for CPF closures where the report writing was done in the campus will be closed in employee group code 58XX according to the designated breakouts.

The results for returns are found on AIMS Table 38 generally using Special Project Codes 0013 and 0015.

Inventory validations must be completed as outlined in IRM 4.4.16.3, Inventory Validation Listing (IVL).

In addition, consideration needs to be given to the accuracy of PCS linkages, any other database records and statutes.

When taking the time to conduct an IVL, care should be given to ensure not only AIMS is correct but other aspects of the case as well. AIMS may be correct, but all PCS linkages may be closed and the case is no longer needed in inventory. An IVL is the time to identify such returns and clean up the inventory.