Partnership Taxation: An Inadequate Record for Computational Adjustments Triggers a Refund

auditTheoretically, The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) is simple:

  • The partnership is audited, and partnership items are subject to adjustment at the partnership level. I.R.C. § 6221.
  • Assessments are made at the conclusion of the partnership proceeding. I.R.C. § 6225(a).
  • Adjustment to partnership items are typically implemented at the partner level through “computational adjustments” that usually do not require a notice of deficiency. I.R.C. § 6230(a)(1).

Actually, however, TEFRA quickly becomes complicated when applied to a particular fact pattern.

On November 24, 2015, a case in the Court of Federal Claims demonstrated that the theoretically simple process of making “computational adjustments” is anything but simple.… Read More

A Fine Distinction: When A Temporary Regulation Is No Longer Temporary.

The IRS churns out regulations every year. When it does so it generally uses the notice and comment procedure prescribed by the Administrative Procedure Act. At times, however, it has to issue regulations immediately, as when new tax legislation is passed. In these cases, it resorts to temporary regulations. Sometimes these “temporary” regulations take up quasi-permanent status. In other instances, they may be incorporated into final regulations that are adopted through normal APA procedures.

Last Friday, the D.C. Circuit issued an opinion that turned on a very fine distinction: the difference between a temporary regulation standing on its own and a temporary regulation that had been incorporated into a final regulation.… Read More