4.31.3. TEFRA Examinations - CPF Procedures

(1) TEFRA was passed in 1982 to allow examinations and statutes to be controlled at the partnership level. This eliminated the need to control each individual partner statute. It also unified the litigation process whereby the tax matters partner (TMP) or a notice partner may commence such litigation at the partnership level by filing a petition rather than each individual partner. The PCS was created to establish an electronic linkage between the partnerships and their underlying partners. This helps ensure that partners, no matter how complex the partnership structure, are issued notices and adjusted in a timely manner. PCS linkage allows the campus to work the partners so examiners can focus on partnership examinations. PCS also allows the campus to systemically generate notices, control statutes, and gather closing information.

(2) Section 1101 of the Bipartisan Budget Act (BBA) of 2015 repealed TEFRA partnership and Electing Large Partnership (ELP) provisions beginning with tax years beginning on or after 1/1/2018. BBA has replaced TEFRA and ELP procedures with entirely new partnership audit provisions. The new regime provides for determination, assessment and collection of underpayments at the partnership level unless certain elections are made by the partnership.

(3) Generally, all partnerships with tax years beginning 1/1/2018 or after will be subject to the BBA centralized partnership audit regime. Certain eligible partnerships may make an election out of the BBA regime. However, the law allows eligible partnerships with tax years that begin 11/3/2015 to 12/31/2017 to elect into the BBA regime when they are initially notified of selection for audit (Early Election). Temporary regulations (§301.9100-22T) that provide the time, form and manner for making the election were published on August 5, 2016 as Treasury Decision (TD) 9780.

(4) This IRM is still in effect for all TEFRA partnerships and remains in effect for partnership years beginning before January 1, 2018.

(1) TEFRA policy was established in response to the partnership provisions of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 and remains in effect for partnership years beginning before January 1, 2018.

(1) The Director, SB/SE, Headquarters Examination, Field and Campus Policy (SE:S:E:HQ:EFCP) is responsible for:

1. Coordinating and implementing TEFRA policy changes;

2. Coordinating resolutions for TEFRA related problems; and

3. Updating this handbook.

(2) The SB/SE Program Manager, Examination Field and Campus Policy, Campus Exam and Field Support (SE:S:E:HQ:EFCP:CEFS) is responsible for:

1. Ensuring that TEFRA procedural changes and computer program changes are implemented and coordinated with area office and campus examination personnel; and

2. Monitoring and evaluating area office and campus examination PCS quality control procedures.

(3) Field Territory Managers, Field Area Directors, Director over LB&I Ogden and Director, Examination - Brookhaven, are responsible for ensuring that TEFRA policies and procedures are followed.

(4) Field Examination Managers and Campus Field Support Operations managers are responsible for:

1. Maintaining an updated copy of IRM 4.29, Partnership Control System (PCS) Handbook, in their respective functions;

2. Ensuring the training of technical and clerical employees in TEFRA procedures; and

3. Establishing PCS records and acting on PCS reports in a timely manner to assure an accurate PCS database.

(5) The Campus TEFRA Coordinator works with:

• The other TEFRA coordinator(s)

• Their local employees

• Other campus functional areas to ensure timely processing of TEFRA related returns

(6) The campus PCS Coordinator is charged with:

• Identifying and resolving technical problems

• Identifying and coordinating the resolution of PCS systemic problems

(7) Following are specific Campus TEFRA Coordinator responsibilities:

1. Coordinate with campus pass-through coordinators, Technical Services Pass-through Coordinators (TSPC) and the Appeals TEFRA/BBA Team on case processing issues;

2. Coordinate with Headquarters on any legal issues that need to be addressed by Chief Counsel;

3. Review closing packages for completeness;

4. Provide technical support to employees and management.

(1) Program Reports: Each year a closure goal is established for the campus.

(2) Program Effectiveness: The closure goal is monitored monthly to ensure the objectives are met. Since the campus does not control the number of partner returns closed each year, the closures are evaluated throughout the year and the goal is adjusted as needed.

(1) The number of one-year assessment statute dates are monitored to determine if the closure goal is attainable, or if it needs to be increased.

(1) There are several terms unique to TEFRA. Examples of these terms:Defined Terms and Acronyms

(1) The following IRM cross-references may be helpful:

1. IRM 4.31, Pass-Through Entity Handbook

2. IRM 4.4, Audit Information Management System (AIMS) - Validity and Consistency

3. IRM 4.29, Pass-Through Control System

4. IRM 8.19, Appeal Pass-Through Entity Handbook

5. IRM 25.6.23, Statute of Limitations, Examination Process-Assessment Statute of Limitations Controls

(1) PCS is the system of record for controlling pass-through returns. The PCS database establishes an electronic linkage between a pass-through and all partners linked to it. This linkage ensures the correct partners are properly provided notices and allows the campus to monitor statutes unique to TEFRA. Statutorily required TEFRA notices are systemically generated through PCS, as well as mailing lists. The system also generates several static inventory and statute reports. All returns assigned to the campus TEFRA program inventory must be linked on PCS if possible.

(1) The TEFRA CDI Application is a valid substitute for IDRS TXMOD controls. The campus will load all returns onto the CDI application to assist with processing and statute control. Local procedures will be developed regarding the proper use and function of the CDI application.

(2) IDRS TXMOD controls are used to assist in inventory management and statute control. See IRM 4.31.3.13.18.1(13), CCA 42-43 (ORCAS ).

(1) Employees must use the Integrated Automation Technologies (IAT) tools shown in Exhibit 4.31.3-1 whenever possible. The use of some of the tools is mandatory when applicable for use. The IAT tools simplify processing by assisting the user with IDRS research and input. The tools reduce the chance of errors and improve productivity. They are desktop productivity enhancing tools. The IAT Web site should be check periodically for new tools that may assist in processing cases. Descriptions of each tool as well as job aids for each tool can be found on the web site.

(2) If a mandated tool is not used because it was determined not to be appropriate due to a specific situation, those circumstances should be documented in the case file.

(3) If an IAT tool is not available, or an employee has a problem with the IAT Task Manager, the case should be processed through IDRS following established procedures. Make a note in the case file if an IAT tool is not used.

(4) IAT tool users can visit the IAT Web site, where you can sign up to become a subscriber to the IAT newsletter. The iNews details all ongoing IAT activity with tool retirements and rollouts.

(1) If you need to contact a taxpayer designated as Potentially Dangerous Taxpayers (PDT) or Caution Upon Contact (CAU), please refer to IRM 25.4, Employee Protection, for the most current guidance.

(1) The key case examiner will forward the Form 14090, TEFRA Linkage Request Check Sheet (LB&I) or Form 14091, TEFRA Linkage Request Check Sheet (SB/SE), directly to the CPF through the group email box shown on the form. A complete linkage package includes:

1. A scanned or electronic return. Schedules K-1 must be included with the scanned or LIN image. If the return has a LIN image, the LIN link will need to be included on the check sheet. For paper returns, fax to the number provided on the check sheet. If the return is too large, it may be mailed to the address on the check sheet.

2. A copy of the election Form 8893, Election of Partnership Level Tax Treatment, or other election statement if the partnership elected to be covered by TEFRA proceedings.

3. Electronic files of the TMP Notice of Beginning of Administrative Proceeding (NBAP) letters.

4. The date the TMP NBAP letter(s) were mailed and the Certified Mailing Number.

5. A spreadsheet file verifying the reconciliation of the Schedules K-1 percentages of profits.

6. Scanned images of all Form 872-P or other authority used to extend the key case statute.

7. Form 15034, PCS Limited Linkage Approval - TEFRA (if applicable).

(2) The TEFRA partnership must be fully established in status 12 on AIMS prior to submitting the linkage package.

(3) If any partner returns will be examined in the field, those returns must also be established on AIMS prior to linkage.

(4) An analysis of the entire partnership structure should be completed to determine the impact of any adjustments. If potential partnership adjustments will not result in material assessments to the underlying partners, then linkage should be reconsidered. Limited linkage may be an option and Form 15034, PCS Limited Linkage Approval, should be included.

(5) There must be at least seven months on the key case statute when the campus receives the package. If less than seven months remain, reject the package to the agent to follow the TEFRA procedures in IRM 4.31.2.3.1, Initiating Timely Examination of Key Case Returns.

(1) The field will submit linkage packages to the campus the earlier of 120 days of the NBAP being sent to the partnership or when the adjustments are known. The package requests the campus to establish the key case partnership on PCS, and begin establishing an electronic link, via PCS, between the key case and the underlying partners.

(2) Prior to linking the partners, a Revenue Agent Reviewer will complete a preliminary build-out using the Tier Structuring Tool (TST). This could include:

1. Analyzing the build-out to identify the material partners throughout the partnership structure.

   Note: Materiality is defined in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. LB&I employees should refer to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to define materiality.

2. Identify any unknown partners and look for special allocations.

3. Direct any Schedule K-1 perfection that needs to be started immediately. For example, identifying an unknown partner that has a large percentage of ownership, or reconciliation of the K-1 to the return.

4. Determine if there will be more than 100 material partners (direct and indirect).

5. Determine the suspense period (3-12 months) before indirect linkage or follow up. The suspense period is subjective. The purpose is to delay linkage when possible to avoid establishing returns on PCS/AIMS that may have immaterial adjustments and result in no changes. The age of the case, statute or other special circumstances need to be considered when determining the length of the suspense period.

   Note: You may need to contact the field agent to determine their proposed adjustments if those weren’t provided on the linkage request form.

(3) The CPF will research and verify the material Schedules K-1 Taxpayer Identification Numbers (TINs) are correct. If a TIN is incorrect, the CPF will attempt to obtain the correct TIN. If the CPF is unsuccessful, the field agent may be contacted for assistance on direct level partners. The preliminary build-out will be updated as new information is received.

(4) Key cases with more than 100 material partners will be flagged as a large case. Input "(>100)" on PCS using the special user message (Command Code (CC) TSCHG Item 07).

(5) The CPF Inventory Control Manager (ICM) will monitor the key cases for movement into status 27 by using PCS Weekly Report 21-3. The ICM will alert the responsible campus agent that adjustments are known.

(6) Once adjustments are known, or a determination is made to begin linking the remaining material partners, the Revenue Agent Reviewer will prepare a final build-out spreadsheet. The adjustment amount used to create the final build-out will be entered onto PCS (CC TSCHG Item 08). The build-out will be used as a guide for linking all material partners. Once linkage is complete, the partners linked on PCS should match the build-out spreadsheet. Revenue Agent Reviewer will initiate partner linkages by providing the final build-outs to the linkage tax examiners.

(7) The key case CPF will perform the research to verify that a partner return has been filed by using CC IMFOL or CC BMFOL. If no TC 150 is posted on Master File and the partner is material then non-filer procedures should be followed (see IRM 4.31.3.4.2.9, Non Filers, and IRM 4.31.3.5.5.3 Failure of a TEFRA Partner to File a Return,). A non-Master File AIMS will need to be established prior to linkage. If the partner is direct to the key case and their percentage of ownership is substantial, contact the Campus TEFRA Coordinator as they may want to contact the field Revenue Agent to see if they want to control the partner and do the SFR.

(8) If the information available from the partner indicates the pass-through entity Employer Identification Number (EIN) is "applied for", the examiner should request NAMEE research to verify that the return was filed.

(9) If the taxpayer (partner) leaves the pass-through entity EIN blank, the examiner should ask the taxpayer for the EIN. If the taxpayer provides an EIN, no further action will be taken. If an EIN is not provided, the examiner will verify that the return was filed by requesting the research in (3) above.

(10) Special consideration needs to be given to non-filers, parent/subsidiary partners, and Tax Exempt/Government Entities(TE/GE) partners. For procedures for these partners see IRM 4.31.3.4.2.1, Using Dummy Numbers and Non-Master File Linkages. All partners will be linked as needed based upon the impact of the adjustments to those partners.

(11) Only the remaining partners identified as material should be linked. No partner (direct or indirect) should be linked if they are not on the build out spreadsheet. Linkage of additional partners should only be done after consultation and approval of the Linkage Agent.

(12) The Revenue Agent Reviewer will ensure Schedule K-1 perfection is complete. A perfected Schedule K-1 is one that has the correct entity information. Schedules K-1 may be secured using K-1 Imaging Network (KIN), Employee User Portal (EUP) or using data from yK1.

(13) The CPF inputs CC TSLODK when linking the notice partners. Material non-notice partners and indirect partners will be loaded onto the PCS using CC TSLOD, using Form 8341, PCS Establish or Add.

(14) After loading compare partners linked to CC TSUMYP and build out to verify that all material partner linkages are established and the structure is complete.

(15) Monitor to ensure AIMS controls are fully established.

(16) The partner’s percentage of profits will be entered on all linked material direct and indirect partners. (CC TSCHG Item 06). The input of the percentage of profits are important as they will be used to determine materiality once the partnership adjustments are finalized.

(17) To expedite linking of the indirect partners, AM424 may be done prior to linkage.

(18) When complete, PCS linkage must match the build out. Verify that all AIMS is fully established before building case files for the partner returns.

(19) NBAPs should be sent using the partner’s name and TIN on the Schedule K-1 along with the partner’s most current address on Master File (CC INOLES). Spouses are not required to be sent a separate NBAP unless the spouse is listed separately as a partner on the Schedule K-1, otherwise identified as a partner on the partnership return, or identified as a partner entitled to notice as provided in Treas. Reg. § 301.6223(c)-1(b).

(20) An employee mailing the partner NBAPs via regular mail must sign the mailing list of the partners that were sent NBAPs. The statement is part of the mailing list that is generated through PCS. The employee signing the mailing list is attesting to the mailing of all notices included on the listing. This mailing list could be used in court to verify that the Service issued the notices as required by law.

(21) Within 10 days after mailing of the NBAP, a copy of the mailing list will be sent to the field Revenue Agent. A copy of the mailing list will be placed in the CPF key case administrative file, and another will be added to the Mail List Book maintained by the campus indefinitely. The Mail List Books should never be destroyed without approval from Headquarter TEFRA Analyst(s).

(22) The CPF will update the key case 120 day date on the PCS using CC TSCHG, item number 13. The 120 day date is computed by adding 120 days to the date the last NBAP was mailed to any partner.

(1) A Form 5546 labeled "Flow Through Notification" is generated for each partner that is successfully linked on PCS and AIMS is fully established.

(2) Rejects are perfected using the TC 424 Reject Register. When accounts established through CC TSLOD do not match at Master File, they are listed on the TC 424 Reject Register as status 99 rejects.

1. These accounts do not establish on AIMS and no Form 5546 is produced.

2. This condition may be caused by an input error, an incorrect MFT, tax period, or name control. This condition may also be caused by the lack of a TC 150 or the requested module is on retention.

3. The TC 424 Reject Register is distributed weekly to each CPF.

4. Status code 99 rejects must be worked promptly by each CPF.

5. TSUMYP can be used to check if linked partners match Schedules K-1, (See IRM 4.29.2.2, Establishing Investor Records on PCS (TSLOD)).

(1) Quarterly, each CPF will review their linkages for each pass-through record for which it has an administrative file and for which one or more investors were linked. The linkages should be compared to the build out. There are several PCS reports that can be used for this purpose which are created weekly, monthly or quarterly on Control-D. The PCS 22-3 Report is generated quarterly on Control-D for all pass-through entities even if no new investors were linked to that pass-through entity during that quarter. Report 22-3 is used to monitor AIMS controls and must be worked as follows:

1. Partner linkages without a full AIMS data base which appear with a name control and no statute date (424 Reject) should be reviewed to ensure the correct taxpayer was linked before they drop off AIMS or PCS;

2. Each Schedule K-1 partner that does not appear per the build out must be researched to determine if it needs to be re-established;

3. Key Case and partners TEFRA indicators must be checked; and

4. Investors in status 90 must be checked to ensure they have not closed prematurely.

(2) The Report 22-3 should be retained for 90 days.

(3) Report 21-3, TEFRA Key Case Action Report CPF, is a weekly report listing key cases whose status codes have been updated to 27, 28, 29, 8X or 90.

1. The CPFs will follow up on key cases that were updated to status 90 to ensure that all partners have agreed or that notice of a defaulted Final Partnership Administrative Adjustment (FPAA) was received from the field.

2. The administrative files of key cases that have been updated to status 82 must be flagged to show that the case is in docketed status.

(4) PCS reports are covered in IRM 4.29.4, PCS Reports.

(1) All TEFRA partner returns in the CPF are maintained in AIMS status 34 unless they are also linked to an ILSC key case. In those instances, the status will be 33 and the EGC in 54XX or 57XX. If the partner has a linkage to TEFRA and one to ILSC/BBA Chapter 2/2A, they will have a PICF code of 4.

(2) Status codes 24 should be used for returns when a statutory notice of deficiency is sent due to affected item issues.

(3) Status 51 is used when cases are closing.

(4) The CPF will use the following AIMS EGCs to control their inventories. No other EGCs may be used.

(5) Where EGC ranges are provided (except 5880-5899), codes within the range may be assigned at local option with HQ approval. EGCs 5000-5399 are reserved for Correspondence Examination; 5400-5499 are for ILSC (See IRM 4.31.6.2.3, CPF Employee Group Codes); 5500-5699; 5700-5799 BBA Chapter 2/2A and 5900-5999 are available for local option.

(6) When a case file is created, but there is no return, the EGC can be updated from 5800 to 5801. Once a return is received, the file can be updated to EGC 5805.

(7) Where aging criteria is none, EGC specific aging criteria may be determined locally as needed.

(1) Research IDRS using CC AMDIS (or AMDISA), CC TSUMY, TXMODA, IMFOL, and/or BMFOL. If AIMS indicates the partner return is established in Primary Business Code (PBC) other than a CPF PBC (295 or 398) or an Employee Group Code (EGC) other than 54XX, 57XX or 58XX do the following:

1. If the return is in status 06 or 08, request the AIMS control and if a paper return request a copy.

2. If the status is 10 or above, send that function a Form 6658, Related TEFRA Pass-Through Examination Information, with a Schedule K-1. If a paper return and the return is controlled by a SB/SE field examiner or in Appeals and not in Joint Committee or a corporate specialty case request a copy and note the partner file history sheet. The Form 6658 alerts the field group/Appeals of the linkage and a partial closure may be necessary.

3. When the copy of the return is secured, the partner CPF will reconcile the Schedule K-1 to the partner return.

4. Send Form 6658, and Schedule K-1 to the controlling group but do not request a copy of the return for any partners controlled by LB&I field examination, any corporate return with an activity code of 219 or above controlled by Appeals, all Joint Committee, or all corporate specialty returns, which are any corporate return field with a Form 1120 followed by letter (for example, Form 1120-L, Life Insurance company) except Form 1120-A, Form 1120-S or Form 1120-X. The CPF will not be preparing the partner report or making the assessments. The CPF should not establish a partner file.

(1) When a partner is controlled in a CPF other than the key case CPF, the key case campus will provide an electronic copy of the Schedules K-1 to the partner campus. The receiving campus should acknowledge the receipt of the documents within 5 days.

(2) When a partner return is controlled outside the CPF, a copy of the Form 6658, Related TEFRA Pass-Through Examination Information, is noted with the contact point and telephone number of the key case CPF contact. The Form 6658 is forwarded via email to the other area to notify them of the linkage and to include in the partner’s case file. Associate the acknowledged Form 6658 with the partner CPF case file or the key case file for LB&I, Joint Committee and corporate specialty cases.

(1) When a campus receives an electronic Schedule K-1 from another campus, it should be acknowledged within 5 days. The Schedule K-1 should also be associated with the partner’s case file.

(2) The partner’s case history should be notated the Schedule K-1 was received within 3 days.

(3) The partner Schedule K-1 will be reconciled to the partner tax return. If the return does not reconcile, see IRM 4.31.3.5.5.2, Schedule K-1 Discrepancy.

(1) Returns need to be reviewed to ensure the case file is complete. Regardless of whether the case file is paper or electronic the complete partner file consists of:

1. Partner return,

2. Form 5546(optional), and/or Form 4251(if applicable),

3. History sheet or Case History(RGS),

4. Schedule K-1 from the key case return,

5. Prior adjustment documents or amended returns if applicable,

6. AMDISA and TSUMYI prints, and

7. Copies of any letters sent or taxpayer correspondence received.

(2) The transcripts (TXMOD, IMFOL, BMFOL) of each return needs to be reviewed for:

1. Prior adjustments,

2. Freeze Codes,

3. CIC Indicators, and

4. Proper AIMS control

(3) Each completed partner return file must be reviewed by technical personnel prior to suspense.

1. All Schedules K-1 must be reconciled to the linked partner returns before a change report is written.

If	Then
An indirect, related partner is identified by a pass-through partner.	The key case CPF may need to establish the indirect partner using CC TSLODA if said partner is subject to an adjustment.
The screening process reveals a difference in the amount of income or loss between the Schedule K-1 and the partner return with no explanation on the return.	The taxpayer should be contacted to explain the difference.
A material nominee condition exists.	The key case CPF must establish linkage using CC TSLODA.

2. If the amounts shown on the Schedule K-1 do not equal the amounts shown on the return, an inquiry must be sent to the taxpayer requesting an explanation for the discrepancy using Letter 5640, Schedules K-1 Verification. Care should be taken with regard to losses. Losses may be limited at the partner level and may not match the Schedule K-1. A technical referral should be considered before sending out an inquiry to the taxpayer. Our inquiry may prompt the taxpayer to file a claim that may not be valid.

Note: For more information on Schedule K-1 discrepancies, See IRM 4.31.3.5.5.2, Schedule K-1 Discrepancy.

3. All responses should be reviewed by technical personnel who will identify actions needed as follows.

(4) If a partner return is a Form 1065, Form 1120-S, or Form 1041, i.e., a tier, the partner CPF will use the Schedules K-1 information filed with that return to prepare Form 8341, PCS Establish or Add.

1. Form 8341, PCS Establishment or Add Without Notice Generation, is used for linking the partners by CC TSLOD .

2. When building returns for tiered partners the procedures in this section must be followed.

(1) The distributive share of income or loss and other pass-through items reflected on the copy of the Schedule K-1 will be matched against the amount of the pass-through items reflected on the partner's return.

1. Where the amounts do not reconcile, appropriate action will be taken to clarify mismatched information through taxpayer contact (see IRM 4.10, Examination of Returns). Use Letter 5640, Schedule K-1 Verification, when making taxpayer inquiries about discrepant or missing items.

2. This mismatch may be attributable to a variety of situations (i.e., the name on the Schedule K-1 may be a nominee, actual losses may exceed the allowable loss limitation, etc.).

3. If the partner is direct to the key case and controlled by the other CPF any pertinent information should be shared with the key case CPF.

(2) In some instances, partners of a principal (key case) partnership are other partnerships (tier partnerships), S corporations, trusts, nominees, etc. It is possible to have several tiers.

1. Any adjustments to the principal entity may pass to individual taxpayers (i.e., the partners of the tier partnership, the shareholders of the S corporation, and the beneficiaries of the trust, etc.) through the particular entities of which they are members and not directly from the principal entity.

2. When a tiering situation is found, necessary steps to link any additional material returns should be taken.

(1) This subsection discusses the procedures used for the returns received when the key case was linked.

(1) TEFRA issues will be identified by the key case agent, and TEFRA assessments or over assessments will be made by the CPF with the partner case file.

(2) Direct material partners are notified and assessed their share of any TEFRA key case examination results. Additionally, any indirect partner through a tier is separately notified and assessed for their share of the pass-through adjustments.

(3) When a multiple linkage situation exists, the case(s) will be processed as follows:

1. If a material tier partner has TEFRA and other linkages, the pass-through adjustments will be made separately as each related key case examination is finalized.

2. The material partners will be separately notified and assessed for their share of the TEFRA or ILSC examination results. If the partner has a linkage for ILSC closing near the same time, it is important not to combine the two types of adjustments. This is because, the taxpayer has no right to protest or petition the TEFRA adjustments as they were agreed to at the partnership level and are computational. ILSC adjustments require deficiency proceedings and notices.

3. If the ILSC key case is a TEFRA tier, the TEFRA adjustments and ILSC adjustments must be on separate reports and not combined.

(4) Statute control for TEFRA issues is the primary responsibility of the key case agent because the partner statute of limitations is controlled by the key case statute of limitations. Once there is a final determination and a one-year statute is established, the primary responsibility for the partner statutes shifts to the CPF. For items not related to TEFRA, the statute is the responsibility of the controlling area.

(5) For partners with no CPF partner case file, Form 14671, TEFRA Closing Package Notification, is used by the campus to transmit a closing package to the area responsible for making TEFRA assessments or over assessments for partners returns that are:

• Any partners controlled by LB&I field examination,

• Any corporate return with an activity code of 219 or above controlled by Appeals,

• All Joint Committee, or

• All 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.

(6) Once Form 14671 is acknowledged by the controlling area, the responsibility for the partner TEFRA adjustment statute shifts to the controlling area.

(1) In general, all linked TEFRA partners will be suspended at either the Brookhaven or Ogden CPF.

(2) The Brookhaven CPF will link all Small Business/Self Employed (SB/SE) key cases and their related partners, with exceptions.

(3) The Ogden CPF will work all Large Business and International (LB&I) key cases and their related partners.

(4) Partners will remain in the campus where they were first linked. For example, partner S is linked to an SB/SE key case and suspended in Brookhaven. If Ogden links partner S to an LB&I key case, that partner will stay suspended in Brookhaven until completion of all linkages. The partner case file will remain at Brookhaven even if the SB/SE linkage closes first and only an LB&I linkage remains. There may be exceptions where it makes sense to transfer a partner to the other CPF. In such instances, both campuses must agree to the transfer.

(1) It is important to have the partner case file complete and ready when it is time to write the partner report. Not completing follow-up actions timely creates delays when the OYD statute is imminent. Not securing a copy of the return or other documents timely may require taxpayer correspondence that was unnecessary.

(2) Team managers and Inventory Control Managers should monitor their inventory to ensure follow up actions are taken on incomplete files. EGC aging time frames should be followed. See IRM 4.31.3.5.1, CPF Employee Group Codes (EGCs).

(1) Returns are transferred into the CPF in status code 34, EGC 5817. Ensure the return is transferred per IRM 4.4.33, AIMS Procedures and Processing Instructions, Transfers.

(2) The CPF will screen and process all partner cases transferred in from the area as follows:

1. Ensure the return does not meet the requirements of a field controlled case as per IRM 4.31.3.5.8.1, TEFRA Partner Exam With Unresolved SB/SE Partner Examination, or IRM 4.31.3.5.8.2, TEFRA Partnership Examination With Unresolved LB&I Partner Examination.

2. Secure a TSUMYI print to verify that the return is linked to a TEFRA key case. If no linkage is shown, check to see if the return is needed for a carryback or carryover issue. If the return is not needed, reject the transfer by updating AIMS to the prior employee group code and status code and return the case to the area or to the function, which initiated the transfer.

3. Order a TXMOD, IMFOL or BMFOL to determine that necessary partial adjustments were assessed.

4. If partial agreements were secured and have not been assessed, return the partner file to the originating office for assessment provided adequate time (more than six months) remains on the statute. Update AIMS to the prior originating office employee group code and status code. Retain a copy of the return in the TEFRA suspense file.

5. If adequate time does not remain on the statute, the CPF must make the partial assessment. Provide feedback to the originating office.

6. Upon verification of the assessment, identify the TEFRA linkages and reconcile the return to the Schedules K-1. Identify any potential carryback and carryover issues. Update AIMS to employee group code 5818 and status code 34. File the partner file in the partner suspense files.

7. If a partner suspense file was already created, combine the contents of this file with the return package and refile in the partner suspense inventory.

(1) The CPF will screen and process all amended returns and claims received. An amended return may be received as a paper document, or identified by an A freeze. Amended returns and claims include the following:

1. An advance payment of deficiency and interest;

2. An attempted removal from the TEFRA proceedings;

3. An adjustment related to a TEFRA partnership;

4. A Form 1045, Application for Tentative Refund, based on a carryback from or to a suspended year;

5. Protective claims, see IRM 4.31.4.2.6, Protective AARs, or for a claim not related to the TEFRA key case the claim should be processed per IRM 21.5.3.4.7.3.1, Processing Protective Claims; and

6. Issues resulting in a claim for a refund or an additional balance due not related to the TEFRA key case examination.

(2) Procedures to follow upon receipt of a Form 1040X, Amended U.S. Individual Income Tax Return, and/or other taxable claim (Form 1120-X, 1041-X) are:

1. Secure the partner file from the suspense files and associate the document (timely) with a TSUMYI print and an IMFOLT/BMFOL print;

2. Forward all claims to a technical employee for screening, and update AIMS to EGC 5807 (local option);

3. Screen the document(s) to see if the amended return or claim relates to a TEFRA return. Perform a technical screening to determine whether:

List of items to check during a technical screen of a claim

The necessary assessments have been made, and if an assessment is required, ensure that it is made by the IRC 6501 statute The claim is allowable The taxpayer’s return is already open in the field A formal claim disallowance is required The taxpayer needs to be advised that the claim filed is related to a TEFRA examination, Letter 5663, TEFRA Related Amended Return Response The amended return or claim (including protective claims not related to the TEFRA examination) worthy of examination, requires forwarding to the field for examination

(3) Generally, taxable amended returns that address TEFRA issues related to an open key case examination should not be assessed before the proceedings are completed. However, if the taxable amended return is accompanied by a payment, the assessment should be made. A "deficiency" does not include amounts paid (i.e., amounts "collected without assessment"). IRC 6211(a)(1)(B). A "deficiency" also does not include amounts shown on the taxpayer's return. "Return" for this purpose includes an amended return, unless the amended return indicates that the amounts are disputed. Treas. Reg. 301.6211-1(a) (last sentence). The payment eliminates the deficiency.

(4) If there is any possibility that the "payment" can be construed as merely a "deposit" rather than a payment, or if the amended return indicates that the additional amount is being disputed, then the assessment cannot be made until the TEFRA proceeding is complete.

(5) Taxable amended returns that do not address any TEFRA issues should be assessed. These should be assessed by the area that received them. If the amended return was not assessed, it should be returned to that area unless the IRC 6501 statute will expire within 90 days. If the amended return is identified by the A freeze, the amended return must be secured or reviewed electronically to ensure an assessment was made. Allow 60 days from the date of the A freeze is established to allow for the assessment to be made and the return uploaded to the Correspondence Imaging System (CIS).

(6) Claims that address TEFRA related issues related to an open key case examination should not be refunded.

(7) Note in the file if the claim includes other non-pass-through adjustments that result in an overstatement in income or understatement in loss, and will not be processed until the TEFRA proceedings are completed. The additional loss will not be processed immediately to provide the maximum interest offset to the taxpayer. If the taxpayer wants the income or loss processed, it is recommended to get that request from the taxpayer in writing. As part of the request, the taxpayer should explain that they understand that any future assessment as a result of the TEFRA examination may result in additional interest than would be charged otherwise. Letter 5641, Refund Request Response, should be sent to the taxpayer to explain how they can request their refund. The partner claim will be associated with the original file after all appropriate action is taken.

(1) Each CPF must identify TEFRA partner returns that are pass-through entities (tiers).

(2) Following are the procedures for tier returns:

1. All BMF returns (Form 1041, Form 1065, Form 1120, U.S. Corporation Income Tax Return, and Form 1120-S) should be screened by RAs for nonpass-through and potential carryback or carryover issues;

2. Form 1065, U.S. Return of Partnership Income, should be reviewed by RAs to determine if special allocations exist. Letter 5299, Partnership Allocation Request, should be used to secure allocation schedules from tier partners.

   Note: All partners in a tier are not required to be linked. Only those partners that will be subject to an adjustment above tolerance need to be linked. It may be necessary to link more partners if the impact of the adjustment is not determinable.

3. The materiality of underlying partners should be considered when making a decision not to load a tier. As a best practice, a current Tier Structuring Tool map or similar tool should be reviewed if available. In general, the Revenue Agent Reviewer will make the determination on whether or not to link tier returns. The structure of a partnership may be such that adjustments will appear to be de minimis when looking at the mid-level tiers. However, all the adjustments may ultimately pass down into only a few partners. Seeing the entire partnership structure will assist the agent in determining whether a tier should be loaded. Also, PCS should be checked to determine whether or not other linkages exist. Multiple linkages may increase the likelihood of a significant adjustment.

4. If the potential adjustments are material, Form 8341 will be prepared to establish PCS linkage using CC TSLOD to link the material partners, shareholders, or beneficiaries to the tier;

5. The Schedules K-1 (and any Schedule K-1 attachments) from the tier should be copied for establishment of the partner files; If a paper return under NO circumstances should the original Schedules K-1 be used to establish the partner files;

6. Special care should be taken when a tier is a partner in two or more key cases (this is called a multi-linked tier), or is a key case in its own right;

7. When a Form 886-S, Partners' Shares of Income, Deductions, and Credits, a Form 886-W, Beneficiary's Shares of Income, Deductions, Credits, Etc., or a Form 886-X, Shareholders' Share of Income, Deductions, and Credits is used to reflect the distributive share of income (loss), the report writer must note whether the individual partner, shareholder, or beneficiary should be closed as a full closure, or as a partial closure and then suspended;

8. When the tier partner returns are received, they should be reviewed for discrepancies in Schedule K-1 reporting and/or carryback or carryforward issues;

9. Only tiers with material partners must have reports written; and

10. The one-year date for multiple level tiers should be input on PCS in a timely manner even though the pass-through tier reports may not be prepared until a later date.

(1) Request for AIMS controls, tax returns or other documents from an area field group will be sent to the PCS Coordinator.

1. The PCS Coordinator will send Form 15277, AIMS Database Transfer Request Campus Pass-Through Function (CPF), to the requestor.

2. Once the completed Form 15277 is received, the PCS Coordinator should ensure it has the proper information and is signed by the manager.

3. Any requested returns or documents can be attached to the Form 15277. If any original paper documents are requested they should be mailed to the area field group. The PCS coordinator will email the Form 15277 to the requestor with a cc to the manager after marking the completed action and signing the bottom of the Form.

4. The AIMS will be transferred to the group using CC AMSOC. AIMS will update the status to a transfer status 07 and transfer EGC 1998/2998.

(2) The CPF will keep a copy of each original return or document forwarded to the field in the suspense file, except for returns requested by LB&I.

(3) The CPF will update the partner's activity record to indicate that AIMS was updated to the field group and if any original paper documents were sent to the group.

(4) The CPF will ensure that the AIMS data base was updated from the transfer EGC to the correct status and EGC to reflect the requesting office's status, PBC, SBC and EGC codes, and the correct statute date.

(5) Copies of returns for court requests will be certified and processed following "Blue Ribbon" procedures. See IRM 11.3.6.4.2, Preparation of “Blue Ribbon” Certifications.

(1) The Insolvency Interface Program (IIP) updates Master File when a TC 520 is input with the appropriate closing code. The PCS Report 5-4 will notify the CPF of a linked partner's bankruptcy filing.

(2) The CPF will follow the procedures listed below when advised of a bankruptcy:

1. Determine the one-year assessment statute date and input it on PCS. Generally, the one-year assessment statute date is one year from the date on which the taxpayer filed for bankruptcy, although the actual limitation on assessment may be longer.

2. Four PCS element changes are required when a partner becomes bankrupt. If the partner has more than one linkage to a key case, these TSCHG items are required for all key case linkages. Input the following items via CC TSCHG:

Items to be input via TSCHG for bankrupt partner
09-D, to remove the partner TEFRA indicator on PCS (see note below). Note: Removing the TEFRA indicator will change the PICF Code from 5 to 6. 22-B, to update the report package received indicator for Bankruptcy. 29-B, to set the bankruptcy indicator on PCS. 07-Bankrupt. This adds the literal "bankrupt" to the PCS user special message.

3. Forward a Form 3210 to the key case CPF clearly marked with the one-year assessment statute date and the notation "Bankruptcy - TEFRA partner".

4. If the partner is controlled outside the CPF send a Form 3210 clearly marked with the one-year assessment date and the notation "Bankruptcy - TEFRA partner" to the group controlling the case on AIMS (see note below). The receiving office will acknowledge the Form 3210 within five days of receipt.

(3) See IRM 4.31.7, TEFRA Bankruptcy, for more details.

(1) Each CPF must evaluate its inventory for potential fraud cases.

(2) Criminal Investigation (CI) controlled cases must be handled using the following procedures:

1. When an AM424 reject shows that a CI freeze code TC 914 is on a partner's module and a -Z Freeze on the account, AIMS and PCS controls cannot be established. The key case CPF will establish the partner account on non-Master File. The CPF will coordinate with CI to reverse the freeze. When the freeze is removed, Master File linkage will be established.

2. If the CI freeze code TC 914 cannot be reversed, agreement must be reached with CI on issuance of TEFRA notices and procedures for assessments.

3. If CI determines that a partner account is subject to their jurisdiction, the partner will be removed from TEFRA suspense. The CPF must secure a copy of Form 10498-A, Joint Investigation Intent to Commence Civil Action, or similar written documentation from CI before removing PCS linkage and closing AIMS. PCS linkage would be removed using CC TSDEL. This must be noted on the key case history.

4. When CI initiates special enforcement actions against a taxpayer, the partnership items may convert to nonpartnership items. CI should be consulted when they have controls on a partner to see if special enforcement action is underway. If so, CI should state whether the taxpayer should be contacted regarding the conversion of their partnership items. If a notice of conversion is required, work with Technical Services on the generation and signing of the notice. For the items to convert and the OYD to start, the partner must receive notice in accordance with Treas. Reg. 301.6231(c)-5. Delegation Order 4-19 (20) allows SB/SE Area Directors of Compliance; LB&I Industry Directors; Appeals Director, Technical Services; and Appeals Directors, Field Operations to issue such notices.

5. When a taxpayer’s partnership items convert, the partner TEFRA indicator will be removed using CC TSCHG item 09-D on all TEFRA linkages.

6. Notification that the partnership items have converted to nonpartnership items and that no more notices should be issued to the taxpayer will be sent to the key case CPF, if different from the partner CPF, via Form 3210. The key case CPF office will acknowledge the Form 3210 within five days of receipt.

7. CI should be contacted at least 60 days before the OYD expires for approval to issue the stat notice, or to secure a Form 10498-B, Joint Investigation Intent to Solicit Consent to Extend, if they want the statute to expire.

(1) When a Form 906, Closing Agreement on Final Determination Covering Specific Matters, is received by a partner CPF, a TSUMYI (or TSINQI) print will be secured and associated with the Form 906.

(2) The TSUMYI or TSINQI print and Form 906 will be forwarded to the Technical Unit for review.

(3) The Technical Unit will review for the following:

1. Ensure that the Form 906 applies to a TEFRA issue;

2. Ensure that the Form 906 is valid and properly countersigned; and

3. Determine if nonTEFRA issues are open under old Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax.

(4) The one-year assessment statute date must be determined and input on PCS using CC TSCHG. The literal "Form 906" will be input in the PCS user special message field using CC TSCHG, Item 07. A copy of the Form 906 will be transmitted via Form 3210 to the key case or tier CPF, if different than the partner CPF, who will note on the Form 886-Z (or equivalent spreadsheet) "906 secured - issue no notices to the taxpayer." The key case CPF will acknowledge the Form 3210 within five days of receipt.

(5) The Form 906 will be associated with the partner's suspense file. If the CPF has control of the AIMS data base, it will be updated to status code 34, EGC 582X or 583X. The partner file is then forwarded to the Report Writing Unit as outlined in text IRM 4.31.3.13, TEFRA Report Writing Procedures.

(6) The Report Writing Unit will process the Form 906 as a Form 870-PT as outlined in text IRM 4.31.3.7.3, Agreed Cases.

(7) Chief Counsel attorneys and Appeals Officers have been advised of the problems caused by Form 906's that affect TEFRA partners and/or issues. Many taxpayers, practitioners, and attorneys still prefer to use a Form 906 in resolving their case.

(1) The PCS 4-4 report is a listing of all returns on PCS with a one-year assessment statute date. The report is used to monitor TEFRA statutes to ensure partner returns are assessed in a timely manner.

(2) The CPF Code of the partner determines on which CPF report the partner record will appear.

(3) The report can be sorted electronically to provide each unit with a listing of their statutes.

(4) The campus PCS Coordinator also generates a listing for the field for all statute cases they control. These listings are sent weekly to the TSPC and their managers. The TSPCs have specific groups they are assigned to based upon their geographic location.

(5) The campus should follow up directly with the field if a statute is within 60 days. This is to ensure the field is aware of the impending statute.

(6) A Form 895 is prepared for each return. One copy is attached to the case file, the other will be maintained in a file for the monitoring of the statute of limitations date. A statute database may be used instead of the Form 895. Use of the statute database should be notated on the history sheet, (see IRM 25.6.23, Statute of Limitations - Examination Process-Assessment Statute of Limitation Controls).

(1) The combat zone freeze must be released before a case can be established on AIMS. Contact your local AIMS Coordinator to release the freeze.

(1) When working with partners in TEFRA partnerships, the examiner will occasionally need to work with the partner’s POA. This commonly occurs when a partner wants their POA to execute a TEFRA statute extension (e.g., Form 872 or Form 872-A) or sign off on a TEFRA settlement agreement (e.g., Form 870-PT or Form 870-LT).

(2) In order for the POA to work with the examiner on TEFRA related matters, the partner’s Form 2848, Power of Attorney and Declaration of Representative, must comply with the requirements of Treas. Reg. 301.6223(c)-1(e) and should state in some way that the POA is for purposes of subchapter C of chapter 63 of the Code.

(3) A POA for a TEFRA partner does not need to specifically name the TEFRA partnership before the service can deal with the POA for the TEFRA partnership issues. However, it does need to meet the following specific requirements as detailed in the sections below.

(4) A copy of the Form 2848  should be secured and maintained in the case file. The only way to determine if the POA was completed correctly for items related to a pass-through entity is to have a copy. It is best not to rely on the Centralized Authorization File (CAF) due to the special language required.

4.31.3.5.20.1 (04-26-2017)

Form 2848, Part 1 (TEFRA Partner POA)

(1) 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.

4.31.3.5.20.2 (04-26-2017)

Form 2848, Part 3 (TEFRA Partner POA)

(1) 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.

(2) 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.

(3) 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.

4.31.3.5.20.3 (04-26-2017)

Form 2848, Part 5 (TEFRA Partner POA)

(1) 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.

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

4.31.3.5.20.4 (04-26-2017)

Form 2848, Part 7 (TEFRA Partner POA)

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

(1) See IRM 21.6.6.2.21.2, KITA/KIA Procedures, for more information when the indicator exists on the module.

(1) When the TEFRA Key Case examination is completed, the case is forwarded to the TSPC for preparation of the 60 day letter package if there is enough time remaining on the partnership statute.

1. The 60 day procedures must be followed whether the key case is agreed, unagreed, or no changed if at least one partner did not execute a Form 870-PT or Form 870-LT.

   Note: If the field examiner is unable to secure an agreement from a partner that would not have an adjustment, they may request the TSPC issue Letter 6235, Pass-Though Investor No Adjustment, to that taxpayer so the case can be closed agreed. If a Letter 6235 is issued a copy will be included in the notice package being sent to the CPF.

2. The TSPC will prepare a 60 day letter for the TMP and for the TMP's power of attorney (POA), if applicable, but only if the partner requests that the power cover TEFRA proceedings in a statement furnished to the Service.

3. The package will be forwarded electronically to the CPF using the shared drive. The package will contain two separate folders; one folder containing the documents to be issued and the other will be case file information only.

4. The CPF will review package for completeness and acknowledge the Form 14434, Tax Equity and Fiscal Responsibility Act (TEFRA) Notice Package Check Sheet, within five days of receipt.

(2) The 60 day package must contain the following:

1. An original undated 60 day (Letter 1827-F or Letter 1829-F) letter addressed to the "Tax Matters Partner" for the partnership and signed on behalf of the appropriate designated field official;

2. A Form 870-PT (a Form 870-LT with Letter 1829-F if there are affected items) addressed to the TMP, including a schedule of adjustments which shows all adjustments to each adjusted item;

3. A complete copy of the RA's report including the Form 4605-A, Examination Changes-Partnerships, Fiduciaries, S Corporations and Interest Charge Domestic International Sales Corporations, an explanation of all adjustments, and the appropriate distribution schedule;

4. If applicable, a copy for the POA of the 60 day letter addressed to the TMP, with the cover letter (Letter 937);

5. A copy of the completed 60 day letter addressed to the TMP (Copies will be made to accompany the mail out, keep in the case file, and to send back to the originator to show proof of mail out);

6. A Form 886-Z (or equivalent spreadsheet) with correct distributive shares completed for each adjusted item;

7. A Form 15034, PCS Limited Linkage Approval, if applicable.

8. A supplemental report for penalties including the Managerial Approval Form Lead Sheet (IRM 20.1.5.2.3.1), if penalties are applicable. If penalties are applicable, it should be noted in the package; and

9. A completed Form 14434, Tax Equity and Fiscal Responsibility Act (TEFRA) Notice Package Check Sheet, verifying all required items are included in the 60 day letter package.

(3) If the package is incomplete, contact the TSPC who sent the package. The CPF will attempt to perfect the package without returning it. Packages with major omissions will be returned to the TSPC for perfection.

(1) The CPF will review the most current build out map to ensure that all the direct material notice partners are linked or in the process of being linked. If any material partners are not linked, immediate corrective action must be taken before letters are issued.

1. Unlinked notice partners must be re-linked using CC TSLODA, and the partner's Schedule K-1 name and address must be input using CC TSCHG. Research for the most current address and use it if different.

2. If a correct TIN was not identified, an NMF database must be established using CC AMNON before input of TSLODA.

3. Any partners who have partnership items converted to nonpartnership items must have the "TEFRA" indicator removed.

4. DO NOT use a one-year assessment date to prevent notices from being generated, because entering a one-year date will distort PCS reports. If you only need to issue a few notices, use TSNOT with a definer "I" to issue specific notices to individual partners.

(2) Input the partnership adjustment amount on PCS using TSCHG, item 08. The adjustment amount is important to capturing data to determine the productivity of partnership examinations.

(3) Update the TMP name and address on PCS, if needed, to reflect the current information on the 60 day letter sent to the TMP.

(4) The CPF will input a penalty/affected item code on the key case record using CC TSCHG item 14, if the key case examiner is proposing penalties or affected items. The code on the PCS record will indicate whether the penalty claim is legitimate. The penalty/affected item code will also cause the correct forms with the appropriate attachments to generate.

(5) The CPF will generate partner 60 day letters using PCS CC TSNOT2. When the letters are received, the CPF will verify they received the correct 60 day letter, either Letter 1827 or Letter 1829, is the same letter the TMP received and that there is a letter for each partner by comparing the mail listing to the 60 Day mailing list. If a Form 15034, PCS Limited Linkage Approval -TEFRA, was used, the CPF will verify that there is a letter for each material partner by comparing the Form 15034 to the 60 Day mailing list. If any partner letters are missing or incorrect, they may be reissued by PCS using CC TSNOT2, or a manual letter may be prepared.

(6) A copy of the partnership schedule of adjustments will be attached and sent with each partner letter. If the partner would like a copy of the explanation of items, they can request it from the TMP.

(7) The CPF will date the TMP letter with the same date as the partner letters. The original 60 day letter addressed to the TMP (and the POA, if applicable) and one copy will be mailed with a field office return address envelope or with the address label provided.

1. Partner letters will be folded and enclosed in envelopes bearing the return address of the CPF, including a return envelope for the partner.

2. The 60 day mailing list will be initialed and dated and all letters (including the TMP and POA, if applicable), will be mailed simultaneously.

3. A copy of the mailing list will be forwarded to Technical Services with a Form 3210.

(8) The key case administrative file will be documented and a copy of the 60 day letter and the signed mailing list will be placed in the file. The CPF should mail the 60 day letters within 45 days of receipt of an acceptable 60 day letter package from Technical Services.

(1) Protests to 60 day letters must be immediately forwarded an email with the scanned protest to the TSPC controlling the key case.

(2) If a protest is received and more than 45 days have elapsed since the issuance of the 60 day letter, contact should be made with the TSPC to alert them of the protest in order to prevent premature default of the 60 day letter.

(1) Appeals will direct the key case CPF to issue settlement letters to partners in TEFRA entities that were protested by forwarding a settlement package using a Form 14298, Appeals Notice Package Check Sheet.

(2) The CPF must mail the settlement offers within 30 days of receipt of the Form 14298 from Appeals.

(3) The CPF will review the package for completeness and acknowledge the Form 14298 within five days of receipt. The settlement package must contain the following:

1. A Form 14298 annotated as a settlement offer package which clearly reflects the key case name, tax year, EIN, and statute date;

2. A Form 14642, Appeals TEFRA Team (ATT) TEFRA Key Case Transmittal;

3. A letter to the TMP, (generally not applicable);

4. A Form 870-PT(AD) or Form 870-LT(AD), including a schedule of adjustments which identifies the items adjusted and the amount of each adjustment;

5. If available, include a copy of the docket sheet;

6. A copy of the Appeals Case Memo (ACM) (formerly, supporting statement) for the partnership marked "Information Only - Do Not Mail to Taxpayer";

7. A Form 886-Z (or equivalent spreadsheet) with corrected distributive shares for each adjusted item as reflected in the settlement offer. Appeals does not use Form 886-Z for a no change settlement.;

8. A completed Form 4605-A (Appeals does not use Form 4605-A for a no change settlement);

9. Form 15034, PCS Limited Linkage Approval - TEFRA, (if applicable).

10. Affected Items, including partner level defenses to penalties. (This applies to tax years beginning after August 5, 1997.)

List of affected item information includes

An instruction to mail affected item notices to non-notice partners, if necessary; If the TMP has signed an agreement to bind non-notice partners, Appeals will provide a special insert to be sent to non-notice partners explaining that they should sign for affected items, including partner level defenses to penalties, if they wish to accept the offer; Special instructions, if any, for the mailing of affected items, including partner level defenses to penalties; and If affected items, including partner level defenses to penalties, are not applicable, it should be noted in the package.

11. Penalty information and affected items. (This applies to tax years ending before August 6, 1997.)

Penalty information includes

An instruction to mail affected item/penalty notices to non-notice partners, if necessary; If the TMP has signed an agreement to bind non-notice partners, Appeals will provide a special insert to be sent to non-notice partners explaining that they should sign for affected items and/or penalties if they wish to accept the offer; Special instructions, if any, for the mailing of affected items/penalties; and If affected items and/or penalties are not applicable, it should be noted in the package.

(4) If the package is incomplete, the CPF will take every action to coordinate with Appeals TEFRA/BBA Team (ATT) in order to perfect it. All avenues should be exhausted before sending a case back. As a last resort, only packages with major omissions will be returned to Appeals for perfection. Major omissions include missing one or more of the following:

1. A Form 14642; Appeals TEFRA Team (ATT) TEFRA Key Case Transmittal,

2. ACM’s (formerly supporting statements), if not included on the Form 14642;

3. Form 886-A with penalty or affected item language;

4. A missing Form 886-Z (or equivalent spreadsheet)(Form 886-Z is not needed for a no change.);

5. A missing Form 4605-A (Appeals does not use Form 4605-A for a no change.); and/or

6. An omitted schedule of adjustments.

(5) If penalties or affected items are proposed, the CPF will ensure that the penalty/affected item code is present on the PCS. If necessary, the penalty/affected item code will be input using CC TSCHG.

(6) Input the partnership adjustment amount on PCS using TSCHG, item 08. The adjustment amount is important in allowing us to capture data to determine the productivity of partnership examinations.

(7) Update the TMP name and address on PCS to match the TMP letter, if applicable.

(8) Appeals settlement letters are generated by PCS to all linked partners when CC TSNOT4 is input, and to all TEFRA linked partners when CC TSNOT5 is input. Only TSNOT4 will generate the Form 870-LT(AD) for cases with a penalty/affected item code.

(9) When the PCS generated letters are received, the CPF will verify they received the correct letter and that there is a letter for each linked partner who should receive a notice by comparing the certification listing to the Appeals Settlement Letter mailing list.

1. If it is determined that additional letters are needed, they will be generated by the PCS or manually prepared.

2. A copy of the schedule of adjustments received from Appeals will be attached to each partner letter.

3. Partner letters will be folded and enclosed in envelopes bearing the return address of the CPF, including a return envelope for the partner unless Appeals specifically instructs otherwise and includes a return envelope for the partners.

(10) After the Appeals certification listing is verified and signed, and letters are mailed, one copy of the certification listing will be forwarded to Appeals for inclusion in the key case return file; one copy is placed in the key case administrative file with the settlement offer package. The key case administrative file will be noted with all actions taken.

(11) Form 870-PT(AD) and Form 870-LT(AD) may be executed by RA’s GS-12 and above in the CPF, or Appeals personnel, in accordance with Delegation Order 4-19.

(1) No adjustment packages are forwarded to the key case CPF with a Form 14434, TEFRA Notice Package Check Sheet from Technical Services. The Form 14434, TEFRA Notice Package Check Sheet, will reflect the name, tax year(s), EIN, statute date, and the package should contain the following:

1. One copy of the Letter 2621, No Adjustment Letter, the RA sent to the TMP, as required; and

2. A Form 4605-A, Examination Changes - Partnerships, Fiduciaries, S Corporations, and Interest Charge Domestic International Sales Corporations, showing that no adjustment has been made.

Note: Appeals will use Form 14642, Appeals TEFRA Team (ATT) TEFRA Key Case Transmittal, instead of Form 4605-A. Forms 886-Z is not needed for no change cases.

(2) The CPF will prepare a package for each partner containing the following:

1. One copy of Letter 2621, No Adjustment Letter; and

2. Form 4605-A.

Note: Appeals package will only have a copy of Form 14642. Appeals does not use Form 4605-A. Form 886-Z are not needed in no change cases.

(3) The packages will be sent to the partner(s) CPF.

(1) For key cases that have non-protested 60 day letters or for key cases that were protested but have not settled, Technical Services or Appeals must prepare an FPAA package for the TMP and for the POA, if applicable.

1. Technical Services or Appeals must ensure that 120 days have elapsed since the last NBAP was mailed to any partner.

2. The key case file remains in Technical Services or Appeals.

3. The package is forwarded to the key case CPF with a Form 14434, TEFRA Notice Package Check Sheet.

4. The package will be forwarded electronically using the shared drive. The package will contain two separate folders; one folder containing the documents to be issued and the other will be case file information only.

(2) The key case CPF will receive the FPAA package, review it for completeness, and acknowledge the Form 14434, TEFRA Notice Package Check Sheet (within five days of receipt). The package should contain the following:

1. A completed check sheet verifying all required items are included in the FPAA package. The check sheet will be included if the FPAA package is originating from Technical Services. If the package is originating in Appeals, they will use Form 14298, Appeals TEFRA Notice Package Check Sheet;

2. A Letter 1830-F signed on behalf of the Technical Support Manager for each TMP address;

3. A Form 870-PT addressed to the TMP, including a schedule of adjustments which shows the adjustment amount for each item. The Form 870-LT is not used with an FPAA. Affected Items cannot be petitioned through a partnership proceeding;

4. An explanation of all adjustments (statutory notice language). Appeals generally does not use a separate explanation of adjustments on a no change FPAA, but includes the language on the schedule of adjustments;

5. One copy of each dated FPAA, both named and generic, mailed to the TMP;

6. A Form 886-Z with corrected amount for each adjusted item for each partner and correct profit percentages or a spreadsheet with the same information. If the Schedules K-1 show various, then leave blank (Form 886-Z is no longer used on a no-change FPAA). The Schedule of Adjustments and the Form 4605-A must be reviewed to ensure the figures match. The Form 886-Z (or equivalent spreadsheet) must then be matched to the Schedules K-1. Any special allocations or reallocations must be noted on the check sheet;

7. A Form 15034, PCS Limited Linkage Approval - TEFRA, if applicable;

8. A Supplemental Report for affected items;

9. A complete copy of the RA's or Appeals report including Form 4605-A, the explanation of adjustments, and the appropriate distribution schedule. This will be sent whether a 60 day package was issued or not (Appeals does not use a Form 4605-A on a no change FPAA.);

10. A supplemental report for penalties, that includes the Managerial Approval Lead Sheet, see IRM 20.1.5.2.3.1, Documenting Supervisory Approval of Penalties, if penalties are applicable. If penalties are applicable, it should be noted in the package.

11. Counsel should review the FPAA and penalties if applicable and the approving counsel attorney name should be included, although not required for Appeals; and

12. Form 14642, Appeals TEFRA Team (ATT) TEFRA Key Case Transmittal, if the package is originating in Appeals.

(3) If the package is incomplete, the CPF will contact Technical Services or Appeals to take every action to perfect the package.

1. As a last resort, packages with major omissions will be returned to Technical Services or Appeals for perfection if there is adequate time remaining on the statute.

2. Where less than 90 days remain on the statute, the CPF and Technical Services or Appeals will coordinate completion of the package and protection of the statute.

(4) Take caution to ensure that the statute is protected. The TSPC will prepare and issue the FPAA to the TMP and immediately provide the CPF with an FPAA package (and certified mailing list) for partner notification. Generally, Appeals will prepare a TMP FPAA, and include it with the FPAA package, for the campus to mail. If the statute will expire within 45 days, Appeals will mail the FPAA to the TMP using certified mail and simultaneously send a copy of the FPAA and a copy of the certified mailing list to the CPF.

(5) The CPF will review the most recent build out to ensure that all material partners are linked. If any partners are not linked, determine what corrective action must be taken.

1. Verify the adjustment amount is still correct on PCS. Update the TMP name and address on PCS to match the TMP FPAA.

2. Verify all material notice partners are linked. If any are unlinked please see the Campus TEFRA Coordinator for corrective action.

3. Any material partners who have had partnership items converted to nonpartnership items should have the "TEFRA" indicator removed.

4. Do not enter one-year assessment date to stop notices from being generated, as this will distort PCS reports. If you only need to issue a few FPAAs, use TSNOT with a definer "I" to issue specific notices to individual partners.

(6) If penalties are being proposed and no 60 day letter was previously issued, the CPF will input the penalty indicator on the key case record using CC TSCHG item 14.

(7) The FPAA to the TMP should be dated and mailed by certified mail. A copy mailed to a POA, if applicable, should be sent regular mail.

1. The 60 day date, which is the date that the FPAA was mailed to the TMP, is input using CC TSCHG item 16.

(8) The PCS CC TSNOT3 will generate letters for all direct linked partners with no one-year assessment statute date. An additional spousal notice is generated on jointly filed returns. This provides the spouse with an opportunity to file a petition.

1. The CPF will verify that the correct letter was received and that all unagreed material notice partners had a letter generated by comparing the Certified Mail listing to the build out. If a Form 15034, PCS Limited Linkage Approval - TEFRA, was used, the CPF will verify that there is a letter for each unagreed material partner. The CPF will also review Form 15034, PCS Limited Linkage Approval - TEFRA, for any partners not requiring letters.

2. If any material notice partner does not have a letter generated, a manual letter will be prepared.

3. A copy of the schedule of adjustments and an explanation of adjustments (statutory notice language) that was attached to the TMP letter is attached to each partner letter.

   Note: Typographical errors such as a mistyped name or EIN will not invalidate a notice.

(9) Partner letters will be enclosed in envelopes bearing the return address of the CPF, including a return envelope for the partner. If the CPF is mailing the FPAA to the TMP it will be dated and mailed the same date as the partner letters.

1. The partner letters must be mailed prior to 60th day after the letter is mailed to the TMP. Failing to meet the 60 day time frame will result in having to follow untimely notice procedures. The CPF’s goal should be to mail the FPAAs to the partners within 30 days after the receipt of the package in the CPF.

2. All notice partner FPAAs are required to be mailed by certified mail. This is because if challenged in court there is a proof the notice was mailed and delivered.

(10) Within 10 days after mailing of the partner FPAAs, a copy of the certified mailing list will be sent to the TSPC or ATT. A copy of the certified listing will be placed in the CPF key case administrative file, and another will be placed in the Certified Mail List/Mail List Book. The Certified Mail List/Mail List Books should be maintained by the CPF and should never be destroyed without approval from Headquarter TEFRA Analyst(s).

(11) The key case administrative file will be noted and a copy of the FPAA(s) issued to the TMP and the partners will be associated with the file.

(12) The CPF will ensure that the freeze code "H" is not removed from the key case AIMS record by CC AMFRZR until final action on the key case is completed. For example, the freeze code would be removed after the receipt of the FPAA default package or court decision package, but not until the one-year date is entered for the partners and Partnership Adjustment Amount is entered on PCS using CC TSCHG item 08. The adjustment amount is important in allowing us to capture data to determine the productivity of partnership examinations.

(13) The CPF will send the following back to the TSPC or Appeals:

1. A Form 3210 addressed to originator of package (Technical Services or Appeals);

2. A dated copy of each FPAA issued to the TMP if mailed by the CPF; and

3. One copy of the certified mail listing.

(1) There must be 120 days between the date the last NBAP was issued to a partner, and the date the FPAA was issued to the TMP. All partner FPAAs must be issued to the partners within 60 days from the date the FPAA was issued to the TMP. If either of these time frames are not met, the notices were not sent timely and the partners may elect to have their partnership items treated differently.

(2) There are two different types of untimely notice procedures.

1. The TEFRA proceedings are still ongoing, or

2. The TEFRA proceedings are complete.

(1) If no petition is filed with respect to the key case, Technical Services or Appeals (whichever office initiated the FPAA) will default the FPAA. Technical Services or Appeals will forward a default package to the key case CPF to initiate the closure of the partner cases.

(2) The default package includes the following:

1. Form 14434, TEFRA Notice Package Check Sheet or Form 14298, Appeals TEFRA Electronic Notice Package Check Sheet, marked "Default Package" clearly showing the key case name, EIN, tax period, and the one-year assessment statute date;

2. Form 886-Z (or equivalent spreadsheet) stamped "Default" on all pages, showing the corrected amount for each adjusted item of the key case entity return (Form 886-Z is not used on a no-change FPAA.);

3. Form 4605-A (Appeals does not use a Form 4605-A on a no change FPAA.);

4. Dated TMP FPAA notice; and

5. Penalty information. If penalties are not applicable, note that fact in the package.

(3) Upon receipt of the default package, the CPF will ensure that the one-year assessment statute date is input using CC TSCHG or MSCHG item 05. The one-year assessment statute date for a default package is one year plus 150 days minus one day from the date the FPAA was issued to the TMP.

1. The CPF will verify that Form 8339 was entered to reflect the correct item 08, Partnership Adjustment Amount entry,

2. Use CC AMFRZR to remove freeze code "H" from the key case AIMS record, but not until the one-year date is entered for all direct partners, including tiers.

(4) After all packages are forwarded to the partner’s CPF, and when applicable the field group or Appeals, the default package received from Technical Services or Appeals is filed in the key case administrative file which will be so noted. For final key case actions see IRM 4.31.3.14, Key Case Administrative File Suspense.

(1) A key case may be petitioned to the Tax Court, a district court where the partnership's principal place of business is located, or the Court of Federal Claims.

(2) The venue chosen and the rules of the particular court determine the procedures that must be followed.

(1) The subsections below discuss the processing of agreements unique to TEFRA examinations.

(2) Consider the impact of an agreement on all other partners in view of their right to consistent settlement.

(1) When key case partnership adjustments result in a refund, and processing those adjustments is not practicable, the campus may issue Letter 4505-A, Notification of Potential Refunds Resulting from a Partnership AAR, or Letter 4505-E, Notification of Potential Refunds Resulting from a Partnership Exam.

(2) The letters include direction for the partnerships to provide instructions to their partners. The instructions explain how the partners need to file their amended returns to ensure they are not rejected during processing. Partners that do not follow the instructions may have their claims disallowed.

(3) Because the adjustments stem from a TEFRA partnership, the statute is controlled at the partnership level. The partners’ individual statute may appear to be expired. If the partner follows the instructions in the Letter 4505-A or Letter 4505-E, this provides Accounts Management with the information they need to verify the statute is still open and the refund is allowable.

(4) All related partners need to be closed as soon as possible after issuing either Letter 4505-A or 4505-E: otherwise amended returns will be forwarded to CPF because of the open AIMS control.

(1) Those cases that have affected items that fall under Chief Counsel Notice 2009-011 should have an assessment date posted that is 7 months after the final determination. This will allow the campus time to issue stat notices and make the related assessments before the actual OYD expires.

(2) To calculate the SMD, compute the OYD as above and subtract 150 days.

(3) The area submitting the closing package to the campus must prominently state on the package that affected items must be stat noticed and assessed prior to the expiration of the OYD.

(4) Notice 2009-011 applies when the agent is unsure whether adjustments are computational or affected items. When this occurs, the adjustments are processed using both procedures. A statutory notice of deficiency is issued so that it will default prior to the expiration of the OYD. If the taxpayer agrees, or the statutory notice defaults, then Letter 4537, Notice of Computational Adjustment, will be issued and the tax assessed.

(5) The package must clearly reflect that CC Notice 2009-011 applies. This will alert you to issue the notice of computational adjustment and make the assessment after the statutory notice of deficiency is agreed to or has defaulted.

(1) When a statutory notice of deficiency is issued a package report indicator of "S" should be added.

(2) After the partner’s computational adjustments have been assessed, the OYD should be extended 90 days to allow for the processing of the statutory notice.

(3) The one-year assessment date will be updated for the affected items or partner level penalties using CC TSCHG, item 05. The new OYD will be input as (YYYYMMDDXP) where X is the applicable partner closing code (IRM 4.29 3.2.1.1.2) followed by the P. These entries are completed in sequence on the same Form 8339, PCS Change. This is the only time that “11111111” can be overlaid.

(4) The OYD may need to be adjusted again depending upon the action taken by the partner.

(5) If the partner agrees within the first 30 days, the OYD may be shorter than the 90 day period and needs to be adjusted to 60 days from the agreement date plus the number of days suspended. If the partner agrees after 30 days, the OYD will be longer and needs to be adjusted to 60 days from the agreement date plus the number of days suspended. See IRM Exhibit 4.8.9-3, Assessment Statutes: Agreed Case. Depending upon when the SNOD was issued compared to the OYD there may be additional tack on days.

(6) If the statutory notice is petitioned, 11111111 will be entered into the OYD. The dollar amount entered on PCS will be the amount shown on the stat notice. The time should reflect the amount of technical time spent up until the case is transferred to Appeals.

(7) The ASED will be updated by the Appeals Coordinator to a "QQ" alpha code.

(1) See IRM 25.6.1.10.2.9.6, Combat Zone Research, for guidance on identifying a taxpayer located in a combat zone, and the time period for making assessments.

(2) The statute for taxpayers in a combat zone is suspended during the time they are in the combat zone plus 180 days after they exit the combat zone.

(3) When the taxpayer is in a combat zone, the OYD will be extended on PCS for no more than 90 days. At that time, the taxpayers combat zone status will be checked again. If the taxpayer has not left the combat zone, the OYD will be extended again for no more than 90 days. This process will continue until the system shows the taxpayer has exited the combat zone and their return can be processed. Refer to IRM 25.6.1.10.2.9.6, Combat Zone Research, to determine when assessments may be made.

(1) Typically, the TSPC will mail out the TMP letters and include an electronic file in the linkage package. The TMP NBAP, 60 Day or FPAA letters have the return address of the campus. When the TMP letter is returned as undeliverable, the appropriate TSPC needs to be promptly informed. Contact should be made within 5 days of receiving the letter.

(1) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(2) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(3) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(2) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(3) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(4) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(5) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡

3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) The following subsections cover closing package procedures.

(1) Technical personnel in the CPF will prepare examination reports for partners that are pass-through entities (tiers). Tier files will be forwarded for report writing using the guidelines in the text (See IRM 4.31.3.6, Notice Packages) of this Handbook.

(2) Tier reports must be written on a priority basis so as not to adversely impact on the one-year assessment statute date of the tier partners.

(3) Form 4700-T, Examination Workpapers, must be used for report writing workpapers. It is used to annotate examination information when preparing investor reports. It should clearly reflect the actions the report writer made when preparing the report. The report writer will attach the Form 886-Z (or equivalent spreadsheet) and other documents received from the key case CPF to the workpapers.

(4) The report writer will generate a Form 4605-A, which will reflect the adjustments to the tier from the key case. A Form 886-S or Form 886-W needs to be prepared for all partners to ensure the amounts are distributed correctly. The report writer will notate the material partners on the Form 886-S or Form 886-W to reflect the correct amount of income or loss for each material partner to include in the closing package. The material partners will match those listed on the build out. If the key case examination results in a no-change, no Form 4605-A will be prepared for the tier, and the key case closing package will be used in lieu of a Form 886-S or Form 886-W.

(5) If a tier is a partner in more than one key case or is a key case in its own right, special care should be taken in preparation of the pass-through reports. The Form 4605-A and Form 886-S or Form 886-W must clearly indicate that related partner cases should be processed as partial assessments and suspended pending subsequent adjustments. Tier reports should also reflect whether penalties are applicable to the partners. If penalties are not applicable, it should be noted in the report.

(6) The tier CPF will forward a report package to the related partner CPF or field agent controlling the partner return within 30 days from completion of the pass-through entity report. The package will include the following:

1. A Form 3210 which clearly reflects the tier name, EIN, and tax year; the partner name, TIN, and tax year; the one-year assessment statute date, and the type of package being sent;

2. A copy of the schedule of adjustments for the tier which reflects the adjustments passing through from the key case (including the Form 886-S or Form 886-W which lists the tier as a partner and the tier's correct distributive share of each adjusted item);

3. A Form 886-S or Form 886-W showing the corrected distributed share to the related partners; and

4. Penalty information (not used for tax years ending after August 5, 1997, because the penalties are included in the Form 4605-A). If penalties are not applicable, note that fact in the package.

5. If the tier report results in a no change, the campus may input the 11111111 prior to sending out the report to the field group with Form 6658. This allows the field to close the case without inputting Form 8339. Care should be taken to ensure the partner is not linked to a tier that would require additional adjustments related to open key cases. If this is the case the 11111111s should be removed with a 05-T.

(7) If less than three months remain on the one-year assessment statute date, the Team Leader of the tier CPF will contact the Team Leader of the related partner CPF to advise that a package with a short statute will be sent. The Campus TEFRA Coordinators can make contact instead of the Team Leaders.

(8) If the partner is a CIC/LCC corporation, corporate specialty, corporations with activity code 219 or above, or Joint Committee case in Appeals jurisdiction, the Team Leader of the key case CPF will contact the Appeals Technical Specialist - TEFRA to advise that a package with a short statute will be sent. The Campus TEFRA Coordinator of the key case CPF may make the contact instead of the Team Leader. The Team Leader of the key case CPF will send a copy of the package to the Appeals Technical Specialist - TEFRA, or if too bulky, mail by overnight mail.

(9) After the packages are forwarded to the related partner CPFs, the tier return is closed with the Form 5344 prepared in accordance with the text of this Handbook (See IRM 4.31.3.13.8, Completion of Form 5344 – Examination Closing Record). If the tier return has other TEFRA linkages, it will be returned to suspense.

(10) The PCS CC TSCHG is used to update the one-year assessment statute date and assessment results as follows: 05-11111111$TIER,EC. If the AIMS status code is less than 80, time must also be entered.

(11) Reports must be sent to tier partners with the appropriate letter.

(1) The following subsections provide information on the preparation of partner examination reports.

(1) If there are no other TEFRA linkages on PCS, and the return is not needed as a carryback/carryover for any other year, the return is sent for final closure. If other open linkages are present, a partial assessment (AMCLS F) is made, and the return file is suspended pending completion of the other related partnership examination(s).

(2) Form 5344, Examination Closing Record, is prepared by the partner CPF to process partner or shareholder return pass-through adjustments each time an executed Form 870-PT, Form 870-LT, Form 870-PT(AD), or Form 870-LT(AD), defaulted FPAA, or court settlement is received by the partner CPF from the key case CPF.

1. A copy of the Form 5344 will remain in the file until all pass-through issues have been resolved.

2. The closing function will input the PCS CC TSCLS as part of the final AMCLSE procedure. See IRM 4.4, AIMS/Processing Handbook, for general instructions.

(3) Some exemptions to the Form 5344 preparation and processing are:

1. Adjustments received for partner returns that are linked to more than one partnership return will be processed individually as "Partial Closures" each time a pass-through adjustment is received. See IRM 4.4, Audit Information Management System (AIMS) - Validity and Consistency;

   Note: If OYDs are close, it is possible to include multiple adjustments together within the same closing. In that case, only one Form 5344 would be necessary. However, separate Form 8339 would be required to close each individual linkage and capture the assessment information.

2. Only one TC 30X per week per module can be accepted at Master File; one exception is when the adjustment received is for the last linked pass-through entity; in this situation the adjustment will be processed as a final closing;

3. Adjustments received for partner returns with no other issues or linkages are processed as final closings;

4. TEFRA assessments must be separately identified to ensure proper Master File blocking series identification; place the word TEFRA at the top of the Form 5344.

(4) Cases must be closed with more than 60 days on the statute for the case to close systemically. Cases with 60 days or fewer on the statute must be closed manually.

(1) Special attention must be given to certain entry items on Form 5344.

1. Notate "TEFRA" on the top of the Form 5344 per local instructions.

2. CC TSCLS - This block should be checked when a partner return is linked on PCS. This portion will only be completed at the time of the final closing.

3. Item 8 - Agreement Date (partial or final closings). This entry will be completed for tax years beginning after August 5, 1997. (IRC 6601(c)). If an agreement is secured on Form 870-PT, Form 870-LT, Form 870-PT(AD), Form 870-LT(AD) or Form 906, the agreement date is the date the form is signed on behalf of the Commissioner. If an agreement is received using normal deficiency procedures (affected items requiring partner level agreement), the date the agreement was received is required to be entered if the disposal code is 03, 04, or 09 and Item 12 contains an increase in tax and the MFT is 02, 05, 30, 31, 33, 51 or 52. See IRM 4.4.12.5.18, Item 08: Agreement Date. For tax years beginning before August 6, 1997, cases will be closed using disposal code 08 and no agreement date.

4. Item 9 - Priority Code. Priority Code 05 should be used on all non-pass-through cases unless another priority code applies. PC 05 is not needed on pass-through returns.

5. Item 13 - Disposal Code. Cases closed no change should use disposal code 01 or 02. The adjustment amount on the Form 5344, Examination Closing Record, should be blank. Cases closed agreed will generally use disposal codes 03, 04, or 09 or if defaulted disposal code 10. The adjustment amount on the Form 5344, Examination Closing Record, requires an entry other than zero. If you have a situation where the adjustments made to the entity net to zero, enter $1.

Disposal Code	When to use the disposal code.
01 - No Change with Adjustments	This code should be used when changes are made to the entity's ordinary income, loss, or separately stated items reflected on the return or Schedule K-1, and a partner's return is adjusted as a result of the pass-through examination but result in no tax. This would include adjustments to basis, at-risk, passive loss rules, taxable loan repayments, or adjusting the partner's return to match the Schedule K-1 pass-through amounts. Disposal Code (DC) 01 applies to de minimis adjustment and tier closures unless the key case is a no change. It may be used with carryback/carryover years where the return was ordered in for potential issues, but was not needed. For example, if a return was needed to determine the amount of a carryforward adjustment impacting a later year, but not impacting that return, the return should be closed DC 01. Note: An audit report is not required for cases closed below the tax tolerance in the CPF if they are not worked through RGS. An exception will be when the tax changes impact a prior or subsequent tax year (NOL, PAL, etc.) or if the partner is linked directly to the key case and received a notice and would not otherwise receive notification that the exam was complete. Any partner that was issued an NBAP, but not receiving an audit report, should be sent a no change letter as a matter of closure and good customer service.
02 - No Change	In general, this code should be utilized when the examination results in no changes to the key case and no changes will be made to the partners as a result. All partners below the key case being closed DC 02 should be closed DC 02 as well, given no other linkages exist or prior partials were processed.
03 - Agreed Before 60 Day Letter	Used when agreements are secured after the closing conference and before issuance of a 60 day letter or an FPAA.
04 - Agreed After the 60 Day Letter or Appeals Settlement Letter	Used for 1998 and subsequent TEFRA agreed cases (with or without penalties) with an agreement date.
08 - Other	Used for 1997 and prior TEFRA agreed cases (with or without penalties). Also used for AARs and stipulated decisions.
09 - Agreed	Applies only to returns if an agreement is received after the issuance of a 90 day letter, or FPAA.
10 - Default	Applies only to returns if the taxpayer fails to file a petition or sign an agreement after the issuance of a 90 day letter or FPAA, or the notice goes unclaimed by the taxpayer.
11 - Petitioned	(11 is considered appealed on the AIMS tables) - Applies only to returns if the taxpayer petitions court after the issuance of a 90 day letter or FPAA. Not valid with MFT 01, 04, 09–12, 17–19, 71, 72, or 80.
13 - Undeliverable - Notice of Deficiency or FPAA	Used when a Notice of Deficiency or FPAA is returned as undeliverable.
31 - Survey Before Assignment	May be used under specific circumstances with HQ approval. Generally, this disposal code should only be used when closing returns that should never have been brought into the campus inventory. Consult with HQ regarding the circumstance for using this disposal code and secure their agreement before closing any returns. Cases closed using this disposal code will not count as a closure.
32 - Survey After Assignment	Used with carryback/carryover years where the return was ordered in for potential issues, but was not needed. For example, if a return was needed to determine the amount of a carryforward adjustment impacting a later year, but not impacting that return, the return should be closed DC 01. DC 32 should only be used only if no analysis of the return was conducted. For example, carryover years were secured for potential capital loss carryover adjustments but the key case exam did not change capital losses. In that case, the return would be closed DC 32. Cases closed using this disposal code will not count as a closure.

6. Item 14 - Statute Extended to Date (where we are processing an assessment or reversing a tax credit as a partial or final closure). See IRM 4.4.12.5.23, Item 14: Statute Extended to. Because of the various situations that can exist on TEFRA closures, care should be used to ensure that the correct information is shown on AIMS. To compute the ASED after a notice of deficiency, refer to IRM 4.8.9.20.1, Updating the Assessment Statute Expiration Date.

Type of Closure	Statute to use
Full Closure	If the IRC 6501 date has sufficient time remaining to make the necessary adjustment, no entry will be required. If the IRC 6501 has insufficient time remaining to allow an adjustment to be made, or the IRC 6501 has expired, the Extended to Date should reflect the one-year assessment date. Use the later of the one-year date or IRC 6501 date. NEVER shorten the taxpayer’s ASED.
Partial Closure	On partial assessments, after the partial closure has been completed, the statute date on AIMS must be corrected to the original date. If the statute date on AIMS contains alpha characters in the statute date, such as BB, DD, or HH, that date must be updated to the one-year assessment statute date in order to input the adjustment. Use the later of the one-year date or IRC 6501 date. NEVER shorten the taxpayer’s ASED. On partial assessments, after the partial closure is completed, the statute date on AIMS must be corrected to the appropriate alpha code to reflect the true condition of the statute date, and prevent the case from showing as an action item on the AIMS 4.0 listing. If AIMS has "872-A" as the statute date, the Statute Extended to Date should reflect the one-year assessment statute date. On partial assessments, after the partial closure is completed, the statute date on AIMS must be corrected to "872-A".
No Change or GII Closure Cases	It is not necessary to update the Alpha code to numeric if the IRC 6501 statute has expired. See IRM 4.4.12.5.23.1.2, No Change Cases.

Note: There may be times when a numeric entry is required in the statute date field as a result of various validity checks. In those instances where the system requires the statute be updated, use the later of the one-year assessment date or IRC 6501 date. NEVER shorten the taxpayers ASED.

7. Item 28 - Examiner's Time (final closing only). Enter the technical time spent processing the return. This will include the report writing time and any technical research time. Local procedures must be developed to record the cumulative time applied to each return by the CPF technical employees so Form 5344 will record all technical time applied. Campus technical employees are defined in IRM 4.31.1, Pass-Through Entity Handbook, Introduction.

8. Item 30 - Examination Technique (final closing only). Enter "2". See IRM 4.4, Audit Information Management System (AIMS) - Validity and consistency.

9. Item 31 - Examiner's Grade (final closing only). Enter the grade of the examiner. Entry of 03-09 or 11 is optional. Will default to a grade 7 if not completed.

10. Item 34 - Adjustment Amount. Whole dollars only. Not used with Disposal Code 01 or 02.

11. Item 38-40 - Block Number. If the case meets the requirements for electronic closure, use block number 40X.

(2) See IRM 4.4.12, AIMS Procedures and Processing Instructions - Examined Closings, Surveyed Claims, and Partial Assessments, for instructions on reporting adjustments. Items 12, 18, and 34 may be involved.

(3) In an instance where a partner must be fully closed after a prior partial assessment, and the final linkage is a no change, that partner needs to be closed using the disposal code of the most recent partial closure.

(1) For SB/SE partners open in Examination or Appeals, see IRM 4.31.3.5.8.1, TEFRA Partnership Examination With Unresolved SB/SE Partner Examination.

(2) For LB&I partners open in Examination or Appeals, see IRM 4.31.3.5.8.2, TEFRA Partnership Examination With Unresolved LB&I Partner Examination.

(1) When the CPF report writing or technical unit receives a partial agreement, the agreement will receive expedited priority treatment.

1. The report will be prepared and mailed immediately.

2. Normal partial report procedures will apply. (See IRM 4.31.3.10, Partial Agreements)

3. Form 8339, PCS Change, item 05, with 11111111, amount and time will be input.

4. Immediately after the input of the 11111111, amount and time, an item 05-T and a 22-D will be input. This will allow for the next one-year date to be input when necessary and removes the package received indicator.

5. Since no actual one-year date exists, manual processing is not needed as with other cases closed with less than 60 days remaining on the statute.

6. After the partial assessment document is returned, the partner file should be suspended.

7. Appropriate documentation must be in the file to identify the existence and processing of prior partial reports before resuspending the case.

(2) When the CPF report writers receive the final closing package for the partner, they will compare it with any prior packages and/or reports to determine if any issues were previously processed as partially agreed and prepare the final reports accordingly.

(1) If a return was not filed by a partner and one has not been secured by the CPF, and a one-year assessment date was entered on PCS, the CPF should not assess the tax on the TEFRA adjustment unless there is evidence that the partner's taxable income would be increased by the partnership adjustment.

(2) If such evidence does exist, the CPF report writer will assess the tax on the TEFRA adjustment by applying the highest tax bracket applicable for the tax period to the amount of the adjustment without benefit of exemptions or deductions. AIMS should be established using Push Code 036. IRM 4.4.9.3.1.1, Form 5345-B, Examination Request Non- ERCS Users, covers the correct procedures. See IRM 4.31.3.4.2.9.1, SFR Procedures.

(3) SFR procedures will apply to all unreported income as well as partnership adjustments unless the partnership items converted due to a settlement agreement. If there was a settlement agreement, then the partnership items should be adjusted by computational adjustment. Deficiency procedures must be used on all non-computational adjustments, affected item or partnership items not agreed to by a settlement agreement (i.e., FPAA default or court decision).

(1) Employee Accounts are indicated by the "E" Employee indicator on AIMS specifics.

(2) Prior to closing the case will be forwarded to the CPF PCS Coordinator.

(3) The PCS Coordinator needs to provide the Employee Audit Analyst with the TIN, Tax Year and a brief explanation of the adjustment. A contact person can be found at http://mysbse.web.irs.gov/exam/tip/emplaudit/contacts/11076.aspx.

(4) The Employee Audit Analyst will give written permission to change the audit code. This will allow the case to be closed as normal.

(1) When no changing a partner there are two parts to consider: the AIMS record and the linkage record. Partners may have several linkage records, but will only have one AIMS record. Each linkage record will be closed with a Form 8339, PCS Change. There can be several partial closures on the AIMS record, but it may be fully closed only once. The final AIMS closure is where the disposal code is captured. When a partner’s last closure results in a no change, but there have been other prior AIMS partial closures, the disposal code should reflect that of the last tax adjustment.

(2) Partner linkages can be no changed under the following circumstances (See IRM 4.31.3.13.8, Completion of Form 5344 – Examination Closing Record, for disposal codes if fully closing the AIMS linkage):

(3) Partner returns should only be closed DC 02 if the key case partnership was closed DC 02 and the partner had no prior tax adjustments.

(4) Any taxpayer that was issued an NBAP should be sent Letter 5694, Investor No Adjustment, as a matter of closure and good customer service, unless they were previously issued a Letter 2064, Notice of Final Partnership Administrative Adjustment.

(1) The CPF should ensure that an acceptable level of quality on the CPF reports is maintained.

(2) A sample review for quality must be made. The sample review will be analyzed to detect error trends, and recommendations for corrective action will be made. Errors will be recorded on Form 3990, Reviewers Report.

(1) The partner CPF is responsible for determining the correct assessment statute dates on all partner inventory and immediately identifying cases with barred statutes. Responsibility for the preparation of the Form 3999, Statute Expiration Report, or Form 3999-T, Statute Expiration Report for TEFRA Key Case, in tier situations, and the related processing procedures are found in IRM 25.6.1.13.2.8.1, Procedures for the Submission of SB/SE Statute Expiration Reports and IRM exhibit 25.6.1-4, SB/SE Statute Expiration Reporting Timetable (for examination-related activities).

(1) A refund issued in error can be reassessed if the partnership or partner assessment is still open. Erroneous refund procedures are needed when the assessment statutes have expired.

(2) When an erroneous refund is identified, the identifying area needs to complete the Form 12356, Erroneous Refund Worksheet, and send it to the appropriate Accounting Function.

(3) The form should be sent to the coordinator or their manager per IRM Exhibit 3.17.80-4.

(1) The employees of the CPF are to receive standardized training, which will include the areas of the PCS, AIMS, report writing, and necessary TEFRA law and statutes needed for their positions, no later than six months after their selection.

(1) The PCS generates the administrative reports used to monitor the suspended returns and the related key cases.

(2) The level to which unit and dollar accomplishments are distributed is now restricted to the National Headquarters and the area.