Ta E e uti es I stitute Detroit Chapter Meeti g Da id Blai d lai @o ell. o.. Jeife Ra j a @o ell. o.. Feua, Na igati g LB&I s Ne Issue Fo used Audit Pro ess
Curre t tate of IR : Doi g Less ith Less $ illio i udget uts sie all i ease i $ illio allo ated to usto e sei e/telepho e assistae/f aud dete tio / e se u it Co ti ui g esolutio th ough Ap il, o i ease likel i T u p s IR udget p io ities u k o O e all staffi g do %, f o, to, Effe ti el a hi i g f eeze Re e ue Age ts do % f o al ost, to, Appeals Offi e s do f o, to last ea, a k up to, ig ifi a t i eases i e e uti e/se io a age e t eti e e ts % of e e uti es a d % of a age s eligi le to eti e i % of o e all o kfoe eligi le to eti e i % Audit ate lo est sie : la ge usi ess audits de li ed % sie last ea Curre t tate of IR : Doi g Less ith Less oue a use U i. TRAC IR http://t a.s.edu/t a i s
The o l o sta t is ha ge. He a litus BC Coept of Operatio s CONOP a d the IR Future tate Bega de elop e t i i espo se to IR halle ges ig ifi a t udget edu tio s sie I eased espo si ilities: u fu ded a dates of FATCA a d ACA i ple e tatio Te h olog oes: ide tit theft, e atta ks High le el est u tu i g i itiati e aoss ajo di isio s iludi g LB&I a d B/ E Guidi g p iiples ould ha ge the a that the IR ope ates Goal as to i ease effi ie i e a of de li i g esoues Be a e the oe sto e of the LB&I eo ga izatio I te ded to fu da e tall t a sfo IR i te a tio s ith ta pa e s
O je ti es of Reorga izatio Cha ge the a LB&I is st u tu ed O e LB&I, p a ti e a eas, o pliae a eas Issue fo us: sele t o k ased o o pliae isk Choose issues e plo i g data a al ti s a d spe ialized staff Colla o atio : seek a s to iol e ta pa e s i E a p o ess a d eate ie ti es fo oope atio De elop ette t ai i g a d a ee paths a d ette tools a d suppo t K o ledge a age e t, deploe t, e to s Defi e the o pliae out o es of all LB&I o k LB&I Reorga izatio I Co te t CONOP i de elop e t IDR Di e ti e Mah Ce t alized isk assess e t pilot p og a Ap il Appeals judi ial app oa h & ultu e Jul LB&I eo ga izatio aoued ept IR e te p ise oept of ope atio s CONOP Mah Pu. No. Feua IRM updated Mah Ne p o ess fo ases sta ti g as of Ma, LB&I aoues i itial a paig s Ja.,
LB&I Reorga izatio O er ie Cha ges to LB&I o ga izatio ha t eate o e LB&I i gle Deput Coissio e I teatio al/do esti Deput Coissio e s e ge T o Assista t Deput Coissio e s: I teatio al, Co pliae I teg atio Eli i ate i dust desig atio s Mo e to issue ased e a i atio s e p a ti e a eas: A P a ti e A ea is a g oup of e plo ees o ga ized togethe to fo us o o e o o e a eas of e pe tise Ea h P a ti e A ea ill stud o pliae issues ithi thei a ea of e pe tise a d suggest a paig s to e iluded i the o pliae pla LB&I High Le el Orga izatio Dou le li ed o es i di ate E e uti e Le el
Issue Fo used E a Pro ess: Ide tifi atio of Issues Ce t alized isk odel fo ase/issue sele tio G eate use of p edi ti e a al ti s Fo us o st ea li ed audits ith issue fo used app oa h De elop a paig s to alte ta pa e eha io C eate tailo ed t eat e t st ea s to add ess a eas of oo pliae Eli i ate Coo di ated I dust Case CIC P og a Audit Issues Rathe Tha Retus, But... La gest Ta pa e s till U de Co ti uous Audit E a i e s Ma till Ide tif Thei O Issues I pli atio s Re. P o. dis losu es Desig ated suo ses Delegatio o de s Ca paig Approa h Ide tif a eas of g eatest o o pliae Data a al ti s Feed a k f o Field Feed a k f o ta ou it Deplo esoues to those a eas T a spa e t to ta pa e s Fo us o id a ket o pa ies
Risk Ide tifi atio Ce t alizatio of issue sele tio Go eae Boa d de ides issues to add ess a d ho Issues p e ide tified fo e a i e s epa atio of lassifie s f o e a i e s Role of Co pliae Plai g a d A al ti s CPA B i gs all o kload sele tio a eas i to o e offi e I eased fo us o data a al ti s Mo e data e o i g a aila le e.g., ou t ou t epo ti g Goal is to o e f o a ea ti e etu fo used isk app oa h to a o e p oa ti e positio Ca paig Approa h i itial a paig s e eal e phasis o I teatio al Issues Mid a ket ta pa e s Alteati e te h i ues to auditi g Lo ha gi g f uit LB&I o ti ui g dis ussio s ith ta ou it to Ide tif futu e a paig s
LB&I K o ledge Ma age e t Issue P a ti e G oups IPGs, I teatio al P a ti e Net o ks IPNs Fa ilitated k o ledge a age e t, olla o atio De eloped p a ti e u its o a ious issues I teatio al p a ti e u its IPUs a e a aila le https://.irs.go / usinesses/ orporations/international pra ti eunits Do esti issue di e ti es also pu lished. E.g., https://.irs.go / usinesses/updated l i dire ti e for tps ir 6 a di e ti e to Field o epai egs. IPUs a fo eshado futu e a paig s LB&I al ead iested i issues I po ta t esoues fo u de sta di g ho LB&I issue tea a app oa h ou issue
Pu li atio : LB&I E a i atio Pro ess To e p o ided to ta pa e s at ope i g o fe ee Goal: To o plete e a i a effi ie t a d effe ti e ae th ough olla o ati e effo ts. P o ides e pe tatio s fo oth IR a d ta pa e s Outli es Phase E a p o ess Plai g Phase E e utio Phase Resolutio Phase Details set fo th i IRM..,.,., a d., all updated i Mah Issue Fo used E a Pro ess: The E a i atio Issue Tea to take espo si ilit Colla o atio ith ta pa e e phasized Resol e issues at ea liest app op iate poi t E a to seek ta pa e ag ee e t o fa ts efo e NOPA E a Tea e ui ed to o side Fast T a k ettle e t Rules of e gage e t P io s ste elied o do esti hai, hi h failed to esol e p o le s o i teatio al issues Ne s ste allo s o i g up su sta ti e, geog aphi hai s, o o e de isio ake fo all of the issues Aou ta ilit is diffused
Roles a d Respo si ilities of IR Tea IRM.. Case Ma age holds o e all espo si ilit of the e a i atio ; ut is ot g a ted % o t ol o e the ase Issue Ma age o e sees plai g, e e utio, a d esolutio of the issue; o e issue a age pe issue u de e a i atio Othe ee Tea Coo di ato ; Issue Tea ee P iiples of Colla o atio IRM... epla e Rules of E gage e t foe l IRM.. E phasis o olla o atio a o g all pa ties a d ti el ele atio of oes P o ides guideli es fo he i teal ele atio a e app op iate IDR Pro ess IRM E hi it.. Re ui e e ts fo issui g IDRs IDRs to e si gle issue, issue fo used The issue, the i foatio sought, a d ho the i foatio elates to the issue to e dis ussed ith the ta pa e p io to issuae Reaso a le ti ef a e to e dis ussed ith ta pa e, set e a Ti el e ie a d follo up E a oei g espo ses oe suitted
A k o ledg e t of Fa ts AOF IRM... IR is e ui ed to p epa e a state e t of fa ts o Fo A as pa t of its o side atio of ea h issue IR is also e pe ted to issue a p o foa IDR to seek to o tai a itte AOF f o the ta pa e a d to io po ate a additio al fa ts i the ite up IRM p o ides i st u tio s to E a if the ta pa e Ag ees ith the fa ts, P o ides additio al fa ts, Ide tifies disputed fa ts, o Does ot espo d to the AOF IDR A k o ledg e t of Fa ts: For IDR
Clai for Refu d Pro edures IRM.. I foal lai s ithi fi st da s hould ilude fa tual suppo t so that o IDRs e essa Dis uss defi ie i lai s a d p o ide oppo tu it to oe t Clai s isk assessed like othe issues Clai s a e te d audit ti eli e Late lai s e ui e foal a e ded etu Fo X ith suppo ti g do u e tatio pe ial Topi : CAP Co pliae Assu ae P o ess CAP Rose a e eti, othe s at LB&I e aluati g CAP LB&I has losed the CAP p og a to e e t a ts Those ue tl i p og a a e ai, fo o Dis ussio of eati g CAP like p og a that is less esoue i te si e
Alter ati es o Colusio of E a Oe e ei e a Noti e of P oposed Adjust e ts: Fast T a k IR Appeals Re uest Co pete t Autho it assistae Re uest Noti e of Defi ie a d P o eed to Litigatio Ta Cou t ithout pae t Pa ta, lai efu d, a d file suit fo efu d i Fede al Dist i t Cou t o Cou t of Fede al Clai s Coede the issue IR Appeals Desig ed as i depe de t settle e t fo u Missio of IR Appeals: To settle ases To esol e ta o t o e sies, ithout litigatio, o a asis hi h is fai a d i pa tial to oth the Go e e t a d the ta pa e, a d i a ae that ill e hae olu ta o pliae a d pu li o fidee i the i teg it a d effi ie of the ei e Co side haza ds of litigatio Do ot o side osts of litigatio o uisae settle e ts
IR Appeals Ta pa e suits foal itte P otest E a tea ill e ie a d p epa e itte e uttal to P otest P e suissio o fe ee ith IR e a a d IR Appeals Appeals o fe ee follo s p e suissio o fe ee usuall sa e da Noal p o edu e is to elude E a e pa te ules appl Appeals Reorga izatio Appeals eo ga izatio a kg ou d Appeals Judi ial App oa h a d Cultu e egi s TIGTA Repo t o pe alt ases Jul Ne p o edu es fo do keted ases, Re. P o. Mah Ne I teal Re e ue Ma ual IRM p o isio s o o fe ee p o edu es O t. Ne o ga izatio al st u tu e O t. Cha ges to ATCL settle e t autho it
Appeals Reorga izatio Cha ges to Appeals st u tu e Appeals Judi ial App oa h a d Cultu e AJAC P o edu al ha ges Cha ges i Appeals Workfor e FY FY FY Total taffi g,,, Cases I,,, Case Closu es,,, Sour e: IRS Data Book Ta le 0.
This image cannot currently be displayed. // Appeals Judi ial Approa h a d Culture Proje t AJAC No do keted ases: Appeals ill ot o side e fa ts ot p ese ted to E a Appeals ill ot aise e issues ot o side ed E a ee IRM... Ne Issues a d Reope i g Old Issues ; Appeals Poli tate e ts a d IRM..
Ne Issues at Appeals Appeals ill ot aise e issues ot o side ed E a Appeals ill ot eope p e iousl ag eed issues Ta pa e a aise e issues o e theo ies Appeals a o side ithout de elopi g e fa ts Appeals to e uest e ie a d oe t f o E a da s e ui ed o statute of li itatio s to o sult E a Ne Fa ts at Appeals Appeals ill ot e gage i fa t fi di g AOF IDR ai ed at e su i g that Appeals is ot o side i g e fa ts Ne i foatio o e idee ea s Not sha ed ith E a I ie of Appeals Offi e, e its additio al a al sis o iestigati e a tio Ne i foatio p o ided afte NOPA o ith P otest a e te d E a possi le additio al IDRs
Do keted Cases a d Appeals Re. P o. : Cases filed i Ta Cou t auto ati all efeed to Appeals Cou sel a e uest to atte d settle e t o fe ee Ne issues, fa ts Appeals etai s ju isdi tio Appeals sha es e issue, fa ts ith ou sel Ne p o edu e fo Do keted E a i atio Assistae. See e IRM.. ; Appeals Poli Di e ti e Ju e, Ta pa e a see, espo d to E a s e a al sis I pa t of AJAC o E a trateg No e issues pla es p e iu o allo i g E a to p ese t ase ithout oe t f o ta pa e U i te ded esult No e fa ts e ui es ta pa e to p ese t all fa ts as pa t of e a i atio p o ess P otest is e d of E a, so should p ese t fa ts i P otest If eed e pe t, ust p ese t opi io to E a efo e Appeals
Modifi atio s to Appeals Pro edures Mi i u da s o statute of li itatio s Fe e fa e to fa e Appeals o fe ees Rapid Appeals P o ess i.e., ediatio Appeals a iite E a to atte d o fe ee, ut ust a oid ex parte ou i atio s Cha ges to settle e t autho it of Appeals Tea Case Leade s ATCLs IR Appeals Tre ds Ce t alizatio of de isio aki g at Appeals Issue pe ialists a e o t olli g o e ases Ex parte ules e odi g Rapid Appeals P o ess Iol e e a i the Appeals p ese tatio
This image cannot currently be displayed. // Ce tralizatio of De isio Maki g I pa t of Ce tralizatio Appeals Rise of Te h i al pe ialists leads to less fa o a le esults at Appeals Ulea, ut Appeals ad a tage appea s to e e odi g
This image cannot currently be displayed. // Appeals I depe dee Prohi itio o Ex parte Cou i atio s Adopted as e ui ed the Rest u tu i g a d Refo A t of ith the Ta pa e Bill of Rights to assu e Appeals i depe dee Appeals a ot ou i ate ith IR pe soel i othe futio s i.e. E a ithout the ta pa e o ep ese tati e ei g p o ided the oppo tu it to pa ti ipate i the ou i atio Appeals a dis uss ase ith E a i p esee of ta pa e Re. P o., super eding Re. P o. ; IRM..
Rapid Appeals Pro ess IRM.. Appeals p og a si ila to Fast T a k ettle e t, ut Appeals, athe tha E a i FT, has settle e t autho it Mediatio Appeals offi e a ti g as ediato et ee ta pa e a d E a E a e ai s pa t of Appeals p o ess, e pa te ai ed E a Parti ipatio i Appeals Appeals Offi e s a e uest to e te d P e uissio o fe ee, ilude E a i dis ussio of ase fo e te ded pe iod Te h i all ot Rapid Appeals P o ess Ta pa e a sa No, ut fi st o side ta ti al i pa ts
Alter ati e Dispute Resolutio Progra s Pre Fili g Progra s Audit Progra s Appeals Progra s I ter atio al Progra s Co pliae Assurae Pro ess Te h i al Ad i e Me ora da Earl Referral Ad ae Pri i g Agree e ts Pre Fili g Agree e t Progra Fast Tra k ettle e t Rapid Appeals Pro ess Co pete t Authorit Pri ate Letter Ruli gs Delegatio Orders a d Appeals settle e ts, oordi ated issues Post Appeals Mediatio i ulta eous E a i atio Progra I dustr Issue Resolutio Progra Aelerated Issue Resolutio i ulta eous Appeals/Co pete t Authorit Fast Tra k ettle e t Re. Pro. Mediatio Appeals offi e a ti g as ediato et ee ta pa e a d E a P o ides settle e t autho it to E a, iludi g haza d settle e ts Desig ed fo esolutio ithi da s Ta pa e a d IR ust ha e de isio ake p ese t Eithe pa t a e uest o e eipt of Noti e of P oposed Adjust e ts NOPA IRM di e ts E a to suggest Both pa ties ust ag ee
Fast Tra k ettle e t Ca ithd a at a ti e Ca still go to IR Appeals o litigatio Post Appeals Mediatio ot peitted Ti i g: Afte NOPA a d efo e da lette Ta pa e p ese ts positio i Fast T a k Me o a du Fast Tra k Re ui es IR app o al No hot i te est Fast? i gle eeti g Lo e ad i ist ati e osts De isio ake : IR E a Ex parte ot appli a le T o ites: Fast T a k ettle e t + Appeals Appeals No IR app o al e ui ed Hot i te est Less Fast Multiple eeti gs Highe ad i ist ati e osts De isio ake : Appeals Ex parte ules appl T o ites: Appeals + Post Appeals Mediatio
Fast Tra k Ma suit e fa ts Edu ate E a a out legal a gu e ts, a espo d E a a aise e issues Appeals No Ne Fa ts E a lo ked i a d o e legal a gu e ts Not aise e issues Post Appeals Mediatio Re. P o. ; Re. P o. No i di g ediatio p o ess follo i g u suessful effo ts at Appeals settle e t Desig ed to e used he e li ited issues e ai uesol ed A aila le to all LB&I ta pa e s U a aila le if Fast T a k used at E a Appeals Offi e as ediato, ta pa e a use o IR o ediato at ta pa e e pe se
Part ership Audits Co i g Cha ges to the Part ership Audit Regi e; The BBA Repla es TEFRA Part ership Ta atio Pa t e ship is ot su je t to io e ta Pa t e ship ite s a e passed th ough to pa t e s Pa t e s epo t the pa t e ship ite s a d a e ta ed ao di gl
Part ership Audits TEFRA Pa t e ship ite s detei ed at the pa t e ship le el Additio al ta assessed to the pa t e s ELP Pa t e ship le el audit Additio al ta ge e all assessed to pa t e s, ut th ough ele tio ould e assessed at pa t e ship le el BBA Pa t e ship le el audit Additio al ta a e assessed at pa t e ship le el o pushed out to pa t e s Pa t e le el audit If o othe egi e applies TEFRA: appli a ilit Applies to all pa t e ships eept s all pa t e ships A s all pa t e ship has te o fe e pa t e s ho a e i di iduals othe tha oeside t alie s, C o po atio s, o estates of de eased pa t e s i gle ee LLC is dis ualif i g pa t e fo this pu pose Most o po ate joi t e tu es a e s all pa t e ships all pa t e ships a ele t i to TEFRA I, % of pa t e ships ide tified as ot su je t to TEFRA
TEFRA: ta atters part er Pa t e ship desig ates Ta Matte s Pa t e Must e pa t e Rep ese ts the pa t e ship Ca e te d OL, file fo efu d, settle ith IR, et. TEFRA: o tra tual restri tio s o TMP Pa t e ship ag ee e ts ge e all p o ide fo sig ifi a t est i tio s o TMP Re ui e e t to keep ee s i foed a out p o eedi gs a d dis ussio s ith ta autho ities TMP a t take ate ial a tio s ithout the o se t of [othe ee s]/[the oa d] E.g., e te d OL, settle audits, file suit TMP a t i d a othe ee ithout the o se t of that ee
TEFRA: oti e part ers Othe pa t e s ith a o e pee t o g eate i te est o a pa t e if fe e tha pa t e s a e Noti e Pa t e s E titled to e ei e oti e of p o eedi gs Ca i g a tio if TMP does ot Pa ti ipate i a p o eedi g ought TMP TMP ge e all aot i d Noti e Pa t e to settle e t TEFRA: stages of audit IR issues Noti e of Begii g of Pa t e ship Audit NBAP Whe the e a i atio is o plete, IR se ds da lette to TMP, i foi g TMP of the ight to go to Appeals If o settle e t at Appeals, Fi al Pa t e ship Ad i ist ati e Adjust e t FPAA is se t totmp a d Noti e Pa t e s TMP a i g suit ithi da s afte FPAA is issued A Noti e Pa t e a i g suit i the follo i g da s if the TMP does ot FPAA is fi al da s afte it is issued, if suit is ot ought, o he ou t s de isio e o es fi al a d pe iod to appeal has e pi ed IR akes adjust e ts at the pa t e le el a d egi s defi ie p o eedi gs fo e tai affe ted ite s
TEFRA: stages of audit Pa t e ship ite s a e detei ed at pa t e ship le el Pe alties a d additio s to ta detei ed at pa t e ship le el a d assessed di e tl agai st pa t e s Pa t e le el defe se ust e aised i a sepa ate efu d a tio Affe ted ite s a e adjusted at the pa t e le el TEFRA: statute of li itatio s Mi i u statute of li itatio s of th ee ea s Ge e all th ee ea s afte pa t e ship etu is filed o, if g eate, the oal se tio th ee ea statute of li itatio s fo a pa t e Usual e te sio s fo sig ifi a t u de state e ts of g oss io e, f aud, a d o etu If a pa t e iludi g a i di e t pa t e is ot ide tified o a pa t e ship etu, the OL is e te ded fo a ea afte the pa t e is ide tified
Bipartisa Budget A t of BBA IR aot effe ti el audit la ge a d ulti tie ed pa t e ships e ause of o ple it of allo ati g adjust e ts to pa t e s The Ele ti g La ge Pa t e ship ELP ules p o ided a alteati e ut e e a el ele ted P io p oposals TEFRA a d ELP Rules epealed a d epla ed Co g ess esti ates e ules ill aise $. illio Pa kage of p oposed egulatio s eleased i Ja ua BBA: effe ti e date Effe ti e fo pa t e ship ea s egii g afte U de p oposed a d te po a egulatio s, a ele t i fo pa t e ship ea s egii g afte No ee,
Whi h regi e applies i a d? TEFRA s all pa t e ship o fe e pa t e s of a e tai t pe BBA s all pa t e ship o fe e pa t e s of a e tai t pe All othe pa t e ships Part ership ta ear egii g et ee / / a d // Neithe, u less ele t i to TEFRA o ele t i to BBA TEFRA u less ele t i to BBA TEFRA u less ele t i to BBA Part ership ta ear egii g after // BBA u less eligi le to a d p ope l ele t out BBA u less eligi le to a d p ope l ele t out BBA Assu i g ELP ules do ot appl. BBA: ele tio out Pa t e ship a ele t out oti g ele tio o its etu Must ha e o fe e pa t e s, a d No pa t e that is itself a pa t e ship o t ust. P oposed egulatio s ilude si gle ee LLC i list of dis ualif i g pa t e s. o po atio s a e pa t e s ut ea h o po atio sha eholde is ou ted agai st pa t e li it Ele tio ade fo ea h ta a le ea
BBA: ele tio out Is ele tio out a good idea? Pote tial hipsa issues allo a le sha e of p ofit o loss, hethe a pe so is a pa t e Pote tial io siste t adjust e ts if statute of li itatio s is ot ope fo all pa t e s o pa t e s appeal i diffe e t litigatio fo u s Pa t e a ot ha e e o ds suppo ti g ite s o K BBA: part ership represe tati e Audit still oeed at the pa t e ship le el TMP epla ed ith Pa t e ship Rep ese tati e No eed to e pa t e ut ust ha e a su sta tial p esee i the U ited tates Elusi e ight to take a tio ith espe t to audit o oept of Noti e Pa t e Pa t e ship Rep ese tati e desig ated o ta etu fo ea h ea.
BBA: stages of audit IR issues a oti e of ad i ist ati e p o eedi g to the pa t e ship o pa t e ship ep ese tati e If appli a le, IR al ulates i puted u de pae t a d ails oti e of p oposed pa t e ship adjust e t NOPPA Pa t e ship has da s to suit i foatio to edu e i puted u de pae t IR issues oti e of fi al pa t e ship adjust e t FPA Pa t e ship has da s afte issuae of FPA to detei e hethe to ake push out ele tio Pa t e ship has da s afte issuae of FPA to file a petitio i ou t BBA: appli a ilit U de TEFRA, pa t e ship ite s a e detei ed at pa t e ship le el. epa ate pa t e p o eedi gs a e e essa fo affe ted ite s a d pa t e ite s. a e esult u de BBA?
BBA: pae t of ta Th ee a s ta a e paid B pa t e ship o ue t ea etu i puted u de pae t B pa t e s o a e ded etus fo e ie ed ea B pa t e s o etus fo ue t ea push out ele tio BBA: i puted u derpae t Ge e al ule is that i puted u de pae t i posed o the pa t e ship athe tha o the pa t e s Lia ilit o puted etti g all adjust e ts a d ultipl i g highest i di idual ta ate. %, u less pa t e ship a sho ate should e lo e Pae t is ade fo the ta ea i hi h the adjust e t is fi al, ot fo the ta ea audited Audit adjust e t i ith espe t to etu esults i ta o ed o pa t e ship s etu I te est a d pe alties assessed at pa t e ship le el A pe alt defe se ust e aised at pa t e ship le el
BBA: i puted u derpae t IR a d T easu to p o ide ules allo i g fo odifi atio of i puted u de pae t i e tai situatio s, iludi g: Adjust e t he e pa t e s a e ta e e pt e tities that ould ot ha e ee su je t to ta o thei sha e of io e o gai Adjust e t fo ates appli a le to C o po atio s o i di iduals eai g ualified di ide ds o apital gai Re ie ed ea pa t e s file a e ded etus a d pa additio al ta due fo u de stated io e B oad autho it to p o ide additio al odifi atio s I foatio ust e p o ided to IR o a e ded etus ust e filed ithi da s afte NOPPA BBA: i puted u derpae t E a ple: I, pa t e ship AB takes eessi e dep e iatio dedu tio s of $ illio, allo ated % to A a d % to B oth o po atio s. The IR akes a audit adjust e t i. Afte odifi atio to aou t fo the % ate appli a le to o po atio s, the i puted u de pae t is al ulated as $,.
BBA: i puted u derpae t I puted u de pae t is ot dedu ti le Ea h pa t e s outside asis i its pa t e ship i te est edu ed its sha e of the i puted u de pae t. Ho do ou detei e a pa t e s sha e? P esu a l ea h pa t e s outside asis is also i eased its sha e of the u de l i g io e. I p e ious e a ple, ea h pa t e s outside asis is edu ed $, its sha e of the i puted u de pae t ut i eased $, to oe t fo the dep e iatio dedu tio s eo eousl take P esu a l the pa t e ship s asis i the asset should e i eased $ illio. BBA: i puted u derpae t I puted u de pae t edu ed to the e te t pa t e s file a e ded etus a d pa asso iated ta. If A a d B oth file a e ded etus fo, o it the eess dep e iatio dedu tio s, a d pa the ta due, the i puted u de pae t is edu ed to ze o. What if A has a NOL a foa d i that as otheise aied to ut a o e used i? Does A ha e to file a a e ded etu i o de to edu e i puted u de pae t? If o l A files a a e ded etu, pa t e ship still has i puted u de pae t of $,. Ho to e su e A does ot ea the ost?
BBA: i puted u derpae t What if, i, A had sold its pa t e ship i te est to C? Does the pa t e ship ag ee e t o ligate A to ea its sha e of the ost of the i puted u de pae t? If so, ho is the pae t A t eated? Is A dee ed to o t i ute the fu ds to the pa t e ship a d e ei e a allo atio of its sha e of the u de pae t? If so, is A s outside asis i its pa t e ship i te est at the ti e of sale i eased $,? Ca A file a a e ded etu lai i g less gai o o e loss o the sale? O does A take a apital loss i? O does A s pae t to the pa t e ship ause the pa t e ship to ha e ta a le io e? BBA: isallo atio of io e E a ple: I, pa t e ship AB has io e of $ illio, hi h the pa t e ship allo ates % to A. I, the IR detei es that the pa t e ship should ha e allo ated the io e % to A a d % to B. Both A a d B a e o po atio s. I puted u de pae t is $, u less oth pa t e s file a e ded etus fo.
BBA: push out ele tio E e if pa t e ship has ot ele ted out, it a a oid pa i g the adjust e t if it ele ts to issue the pa t e s e ised K s Pa t e s pa the adjust e t o thei etu fo the ea i hi h the e ised K is issued Ta due iludes the i ease i hat the ta ould ha e ee i the e ie ed ea, taki g i to aou t the adjust e t, plus a i ease i ta i i tee i g ea s esulti g f o adjust e t to ta att i utes Pa t e ship ust ake ele tio ithi da s of e ei i g the FPA What if the e is a settle e t p e FPA? Pa t e s ha e o ight to ad i ist ati e o judi ial e ie BBA: push out ele tio E a ple: I, pa t e ship AB u de stated io e $ illio, hi h should ha e ee allo ated % to A a d % to B. I, A sold its pa t e ship i te est. I, the IR audits the pa t e ship a d adjusts io e. The pa t e ship ele ts to push out the adjust e t. A has additio al ta due i ased o a h potheti al ilusio of io e i. Io e ilusio should ha e i eased A s asis, esulti g i less gai o sale, ut ho does A lai this e efit?
BBA: push out ele tio What if a pa t e is itself a pa t e ship? Does the uppe tie pa t e ship ha e to pa the ta due, o push it out to its o pa t e s, o is it ele ti e? Does the a s e ha ge if the uppe tie pa t e ship had ele ted out of the BBA ules? If the uppe tie pa t e ship has to pa the ta due, hat ate applies? Ca it edu e the ate sho i g that its pa t e s a e ta e e pt e tities o o po atio s? Te h i al Coe tio s A t of ould ha e allo ed uppe tie pa t e ship to push out the ta. BBA: push out ele tio I te est detei ed at pa t e le el, a d is sho tte ate plus %. Pe alties a d additio s to ta detei ed at pa t e ship le el, ut i posed o e ie ed ea pa t e s. Ho to detei e a pa t e s sha e of pe alties?
BBA: i puted u derpae t s. push out ele tio Could e a diffe ee i the a ou t due Rates appli a le to pa t e ship a d e ie ed ea pa t e s A ilit to use pa t e att i utes a d effe t o pa t e att i utes i late ea s. Diffe e t i te est ates BBA: statute of li itatio s tatute of li itatio s is ge e all th ee ea s f o date the pa t e ship etu is filed o he due, if late Li ited eeptio s he NOPPA issued FPA suspe ds adjust e t pe iod
Co sideratio s for LLC agree e t Most pa t e ship ag ee e ts p o ide ules fo deali g ith TEFRA audits E.g., appoi t a ta atte s pa t e, outli e ho the ta atte pa t e is to a t, ho the audit a e o du ted, hat ights othe pa t e s ha e, et. Befo e the effe ti e date, eed to e ise the pa t e ship ag ee e t Co sideratio s for LLC agree e t Will the pa t e ship ele t out? Will the pa t e ship ele t i ea l?
Co sideratio s for LLC agree e t Pa t e ship ep ese tati e Who ill it e? Ho u h po e ill it ha e? O l the ep ese tati e e ei es oti e f o IR a d has sole po e to a t e te d OL, file suit, o settle ase. Ma ish to est i t ep ese tati e f o taki g a tio ithout o se t f o pa t e s o to o pel a tio i e tai situatio s e.g., file suit Re ou se if pa t e ship ep ese tati e a ts i a ae o t a to the ag ee e t? I deifi atio fo lia ilit fo a tio s take? Co sideratio s for LLC agree e t Rights of othe pa t e s du i g p o eedi gs Notifi atio Pa ti ipatio Co se t Add ess oope atio of pa t e s I al ulati g i puted u de pae t Ag eei g to file a e ded etus?
Co sideratio s for LLC agree e t P o ess fo de idi g hethe pa t e ship pa s i puted u de pae t o pushes the adjust e t out Add ess effe t of i puted u de pae t Ho allo ated to pa t e s Do p e ious pa t e s ag ee to i deif pa t e ship? Pur hasi g a part ership i terest Oe BBA is effe ti e, pa t e ship itself ould ha e ta lia ilit Need to allo ate isk et ee u e a d selle Additio al due diligee ill e e essa Additio al eps a d i deit If audit adjust e t esults i ta e efit to u e, selle a a t to e paid
Pur hasi g a part ership i terest If pa t e ship eases to e ist p io to assess e t, the histo i pa t e s a e lia le fo u de pae t u de egulatio s to e d afted If % of the pa t e ship i te ests a e puhased, a pa t e ship is t eated as easi g to e ist fo this pu pose Questio s? Jeife Ra j a @o ell. o.. Da id Blai d lai @o ell. o..