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Part 8. Appeals

Chapter 19. Appeals Pass-Through Entity Handbook

Section 4. Responsibilities of Appeals Tax Computation Specialists

8.19.4  Responsibilities of Appeals Tax Computation Specialists

8.19.4.1  (02-08-2008)
Overview

  1. This section outlines the responsibilities of Appeals tax computation specialists for TEFRA pass-through entity cases and TEFRA investor cases.

    Caution:

    Users are cautioned to seek advice from the Appeals Technical Guidance Coordinator(s) for TEFRA if questions of authority arise.

  2. Types of pass-through entity cases include:

    1. TEFRA key cases under Appeals or Counsel jurisdiction.

    2. TEFRA key cases from the Department of Justice.

  3. Types of TEFRA investor cases include:

    1. Investor returns under Appeals or Counsel jurisdiction for non-TEFRA issues when a separate TEFRA proceeding (in which the investor has an interest) is ongoing or has been completed.

    2. Coordinated Industry Case (CIC) corporations, Joint Committee and other corporate specialty TEFRA investor cases under Appeals or Counsel jurisdiction when the results of the TEFRA proceeding are known.

    3. In rare instances, TEFRA investor returns which are not CIC corporate, Joint Committee or other corporate specialty cases for TEFRA issues.

  4. All guidance in this section of the IRM concerning the CTFs is for cases controlled on the Partnership Control System (PCS). The CTFs work only with key cases and investors controlled by PCS.

8.19.4.2  (02-08-2008)
Tax Computation Specialist Responsibility

  1. The tax computation specialist is responsible for the preparation of audit work on pass-through entity cases. The audit work may include settlement computations on agreed cases, FPAA/FSAA notices, statutory notices of deficiency and Rule 155 computations. In addition, on cases where the tax computation specialist is working on computations the tax computation specialist will begin the preparation of Form 3210 and the assembly of certain TEFRA closing packages to be mailed to the CTF as instructed by the appeals officer. See IRM 8.19.4.2.2.. In addition, the tax computation specialist may perform various research and reconciliation activities.

  2. Due to the complexities of TEFRA processing and the unique technical and procedural details of such cases, additional duties may be assigned to the tax computation specialist as detailed below.

8.19.4.2.1  (06-01-2007)
Research

  1. The tax computation specialist will secure information regarding Partnership Control System (PCS) linkages and other aspects of key cases or investor cases. This could include securing a TSINQ, a TSUMY, transcripts of account, computations from a closed TEFRA case, current mailing addresses of investors, etc. See IRM 8.19.5.19 for additional information concerning PCS.

  2. The tax computation specialist may need to contact the examiner or the Campus TEFRA Functions (CTFs) to assist in the clarification of certain aspects of the case.

8.19.4.2.2  (06-01-2007)
Closing Packages

  1. A TEFRA closing package is a group of documents that is prepared and assembled once a TEFRA key case is resolved. The closing package is mailed to the key case Campus TEFRA Function (CTF) to associate with the tax returns of the investors (partners or shareholders) in the TEFRA entity in order that the tax resulting from their share of the adjustments made to the TEFRA entity return are computed and assessed in a timely manner.

  2. The tax computation specialists may be asked to begin preparing the closing package to the CTF (including the Form 3210 ) for cases where computations are also being prepared by the tax computation specialist. These would include FPAA/FSAA cases, agreed cases, and entered court decisions where revised computations are needed, but would typically not include defaulted FPAA/FSAA cases, cases petitioned to a federal district court or the U.S. Court of Federal Claims, or entered court decisions where revised computations are not needed.

  3. The Form 3210 includes processing instructions for the FPAA/FSAA, the 870-type agreement forms, defaulted TEFRA key cases, and entered court decisions. Sample Forms 3210 for the most common situations are included in IRM 8.19. If a Form 3210 is needed for a special situation, contact the Appeals Technical Guidance Coordinator(s) for TEFRA for assistance.

  4. If at the time that tax computation specialist prepares the closing package and the Form 3210, some of the documents have not as yet been prepared by the appeals officer (for example, the ACM or Form 5402) or information is not as yet available (for example, the one-year assessment date has not as yet been triggered), the appeals officer will complete the preparation of the closing package.

  5. The appeals officer will review the contents of the closing package (including the accuracy of the Form 3210, especially the one-year assessment date) after it is prepared by the tax computation specialist and before the closing package is given to Appeals Processing Services to mail to the key case Campus TEFRA Function (CTF). The appeals officer is ultimately responsible for the accuracy of the information included in the closing package (including the one-year assessment date) and that the closing package is complete before it is mailed by Appeals Processing Services to the CTF.

  6. Refer to the following exhibits for sample Form 3210 transmittals:

    1. See Exhibit 8.19.4-1. (CTF to Mail Settlement Offer)

    2. See Exhibit 8.19.4-2. (Agreement Forms Received in Appeals)

    3. See Exhibit 8.19.4-3. (Nondocketed Case Agreed Closing)

    4. See Exhibit 8.19.4-4. (Partial Settlement Agreement Forms)

    5. See Exhibit 8.19.4-5. (Appeals Issued FPAA to TMP/CTF to Investors)

    6. See Exhibit 8.19.4-6. (CTF to Mail FPAA/FSAA)

    7. See Exhibit 8.19.4-7. (Appeals Issued No Change FPAA to TMP/CTF to Investors)

    8. See Exhibit 8.19.4-8. (CTF to Mail No Change FPAA)

    9. See Exhibit 8.19.4-9. (Closing Docketed Cases - Decision Entered)

    10. See Exhibit 8.19.4-10. (Tax Court Decision Entered - Case Appealed)

    11. See Exhibit 8.19.4-11. (Final Decision - Appellate or Supreme Court)

    12. See Exhibit 8.19.4-12. (Final Decision - U. S. Court of Federal Claims, District Court, Other Court)

    13. See Exhibit 8.19.4-21. (CTF to Mail No Change Settlement Agreements)

8.19.4.2.3  (06-01-2007)
Miscellaneous Assistance

  1. The tax computation specialist may assist in the preparation of reports to the Joint Committee as discussed in IRM 8.19.6.12 .

  2. The tax computation specialist will prepare the Form 6404(g) worksheet and include the IRC 6404(g) key case comment on the Form 4605-A and (if prepared by the tax computation specialist) on the Form 3210. See IRM 8.19.3.7.6.

  3. For agreed cases, the CTF will generally prepare the 870-type agreement forms (except for the Schedule of Adjustments) and will also prepare the transmittal letters. For unagreed cases, the CTF will generally prepare the 870-type agreement forms (except for the Schedule of Adjustments) and will also prepare the FPAA/FSAA letters. However, there are instances when the tax computation specialist may be asked to prepare the complete 870-type agreement forms, transmittal letters, and FPAA/FSAA for all investors. In these situations, dialogue will be required between the ATM of both the appeals officer and the tax computation specialist as to specifically what the tax computation specialist will prepare. See IRM 8.19.4.5. See IRM 8.19.4.6.

  4. The tax computation specialist may be asked to prepare Form 8339 and Form 8344 in order to update statute dates on PCS for TEFRA investor cases that the tax computation specialist is already doing computations on. However, the appeals officer is responsible for reviewing these after they are prepared and is ultimately responsible for the accuracy of the information included on these forms, including the one-year assessment date.

  5. Depending upon local procedures, either Appeals Processing Services or Tax Computation Specialists will compute the estimated revised deficiency for Appeals Processing Services to enter it on ACDS when the case is closed. See IRM 8.19.2.6 and IRM 8.19.2-1. If the tax computation specialist is computing the estimated revised deficiency it should be prepared when the computations are being prepared.

8.19.4.3  (06-01-2007)
Types of Returns

  1. A TEFRA key case will be either a partnership return ( Form 1065) or an S corporation return ( Form 1120S).

    Note:

    TEFRA procedures do not apply to S corporation tax years beginning after December 31, 1996.

  2. A TEFRA investor's return may be a Form 1040 (individual), a Form 1120 (corporation), a Form 1041 (estate or trust), another partnership return or another S corporation return. These returns may be in Appeals for consideration of non-TEFRA issues.

  3. For cases linked on PCS prior to 1997, the investor returns will generally be held in suspense at the CTF servicing the area where the investor return was filed unless they are in Compliance or Appeals for consideration of non-TEFRA issues.

  4. For cases linked on PCS after 1996, the investor returns will generally be assigned to the CTF that services the Compliance office of the key case unless they are in Compliance or Appeals for consideration of non-TEFRA issues or already linked to another partnership.

8.19.4.4  (06-01-2007)
Request for Tax Computation Specialist Work

  1. Appeals officers will request work from the tax computation specialist by preparing Form 3608 (Request for Audit Work) or the equivalent form available when using ACDS. Counsel attorneys can also use a Form 3608, or they may use Form 1734 , or a memorandum with an attachment detailing the settlement amounts, e.g. Counsel Settlement Memorandum or Decision Document.

  2. The tax computation specialist should ensure that the necessary documents, as outlined in IRM 8.19.4.4.1, are included in the key case file when it is received for computation. If these documents are not included, the tax computation specialist should follow established guidelines when the missing information prevents the tax computation specialist from being able to complete the work request.

    Note:

    Refer to the TEFRA web site on the Appeals home page of the IRS Intranet for acronyms commonly referred to in this section.

8.19.4.4.1  (06-01-2007)
Contents of Case File

  1. The key case file should contain the following documents when received by the tax computation specialist for audit work:

    1. A current AMDISA for the PICF code indicator.

    2. A current TSUMYP for linkage information.

    3. The Revenue Agent Report (RAR) including a Form 4605-A and Letter 1827 (TEFRA Partnership 60-Day Letter) or Letter 1829 (TEFRA Partnership 60-Day Letter For Penalties and Adjustments).

    4. Form 886-Z(C) listing notice investor information.

    5. Form 886-Z (C) or comparable form listing non-notice investor information, if applicable.

    6. Form 870-P, Form 870-PT, Form 870-L, Form 870-LT, or Form 870-S with schedule of adjustments.

    7. TEFRA linkage package checksheet completed by Compliance.

    8. A reconciliation of partner investor distributions to 100%.

  2. If some investors have agreed to the examiner’s adjustments, the key case file may also include executed Forms 870-P, 870-PT, 870-L, 870-LT, or 870-S.

  3. If the key case is in docketed status it will contain Letter 1828 (Notice of Final S Corporation Administrative Adjustment) or Letter 1830 (Notice of Final Partnership Administrative Adjustment) with Form 870-P, Form 870-PT, or Form 870-S attached and a petition.

  4. If an AAR (Administrative Adjustment Request) was filed, the key case will include a Form 8082 (Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR)) with an attached amended Form 1065 or Form 1120S. See IRM 8.19.7 for additional information regarding AARs.

8.19.4.5  (06-01-2007)
Computations for Agreed Cases

  1. The tax computation specialist will prepare the following documents:

    1. Form 4605-A (See IRM 8.19.4.5.1) and ( See Exhibit 8.19.4-14.)

    2. Form 886-Z (C) (See IRM 8.19.4.5.2) and See Exhibit 8.19.4-15.)

    3. The Schedule of Adjustments page of Form 870-PT(AD), Form 870-P(AD), Form 870-S(AD), Form 870-LT(AD), or Form 870-L(AD) (see IRM 8.19.4.5.3).

    4. See Exhibit 8.19.4-17. This exhibit shows the relationship of the information on the Form 4605-A, Form 886-Z(C), and the Form 870-type agreement.

    Note:

    Although many of the 870-type agreement forms have columns for multiple year computations, there could be disclosure problems if more than one year is shown on a form. The only situation that allows listing multiple years on the same 870-type agreement form is when Appeals will be mailing the agreement forms and all investors are exactly the same in each year. If the CTF is to mail the agreement forms, the tax computation specialist will list one year on each Form 870-type agreement form. See IRM 8.19.3.7.2(5).

  2. When Appeals will be mailing the agreement forms to the notice investors, the appeals officer may request that the tax computation specialist prepare the entire agreement form (with a schedule of adjustments) and the transmittal letters for all investors. In this situation, dialogue will be required between the ATM of both the appeals officer and the tax computation specialist as to specifically what the tax computation specialist will prepare and the Form 3608 should specify that Appeals will be mailing the agreement forms to the investors. The appeals officer should identify any special circumstances on the Form 3608, including parent-subsidiary relationships. The appeals officer is ultimately responsible for the accuracy and completeness of the agreement forms and the transmittal letter.

    Note:

    As noted in IRM 8.19.3.8.4.1, the preferred method of mailing the agreement forms is by the CTF and Appeals should generally be mailing agreement forms only when there are a small number of investors.

    .

    Note:

    For same settlement letters - See Exhibit 8.19.4-24. See Exhibit 8.19.4-25. See Exhibit 8.19.4-26. See Exhibit 8.19.4-27. See Exhibit 8.19.4-28. See Exhibit 8.19.4-29. See Exhibit 8.19.4-30. Also see IRM 8.19.3-5.

  3. Depending upon local procedures, the tax computation specialist will compute the revised dollar value for the key case using IRM 8.19.2-1.

  4. If the CTF will be mailing the agreement forms, the tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-1. This exhibit shows a sample Form 3210.

8.19.4.5.1  (06-01-2007)
Form 4605-A (Examination Changes - Partnerships, Fiduciaries, S Corporations and Interest Charge Domestic International Sales Corporations)

  1. Form 4605-A is used to show the adjustments to the pass-through entity return. The tax computation specialist should work from the return and take into account any Form 8082 (AAR), if applicable. The only issues that should be shown on the Form 4605-A are the ones that result in an adjustment to the amount shown on the return. See Exhibit 8.19.4-14.

    1. If the Form 8082 (AAR) has been processed, the tax computation specialist should make sure the adjustments are included in the agreed computation.

    2. If the Form 8082 (AAR) has not been processed, it should be given to the appeals officer/counsel attorney to determine if the adjustments should be allowed in the agreed computation.

    3. See IRM 8.19.7 for additional information regarding AARs.

    .

    Note:

    The campuses will treat all issues not shown on the Form 4605-A as issues accepted as filed on the Form 1065 or Form 1120S. A notation on Form 4605-A in the remarks section may be made to notify the CTF that all amounts which are not shown on the Form 886-Z (C) are accepted as shown on the Form 1065 and Schedules K-1.

  2. The following should be clearly marked on top or in the remarks on the Form 4605-A:

    1. "Appeals Settlement," "Counsel Settlement, " "Tried," as appropriate

    2. "Information Only – Do Not Mail to Taxpayer"

    3. If the case is docketed, add "Decision Entered ___________ " and insert the date the decision was entered.

  3. Include the IRC 6404(g) key case comment on the Form 4605-A in the remarks section and (if prepared by the tax computation specialist) on the Form 3210. See IRM 8.19.3.7.6.

8.19.4.5.2  (02-08-2008)
Form 886-Z (C) (Partners’ or S Corporation Shareholders’ Share of Income)

  1. A separate Form 886-Z(C) should be prepared for each tax year to show the investors' corrected partnership items and penalty or other affected item adjustments.

    1. Investors' addresses are required on the Form 886-Z (C) only when Appeals is mailing the settlement agreements to the investors.

  2. If there are non-notice investors, they should be listed together on a Form 886-Z (C) separate from the Form 886-Z (C) that lists notice investors.

  3. The Form 886-Z (C) should only show the issues that changed from the Schedules K-1. It is unnecessary to show no change issues. The campuses will treat all issues not shown on the Form 886-Z (C) as correctly shown on the Schedule K-1.

    1. A notation on Form 4605-A in the remarks section may be made to notify the CTF that all issues which are not shown on the Form 886-Z (C) are accepted as shown on the Form 1065 and Schedules K-1.

  4. The following should be clearly marked on the top or in the center of Form 886-Z (C):

    1. "Appeals Settlement," "Counsel Settlement, " "Tried," as appropriate

    2. "Information Only – Do Not Mail to Taxpayer"

    3. If the case is docketed add "Decision Entered ___________ " and insert the date the decision was entered.

  5. The investor information on the Form 886-Z (C) does not have to be sorted by area or territory field office. Investor returns that are filed in different areas or territories may be listed on the same page. The investors should be listed either alphabetically or in TIN order.

  6. Reconcile any notice and non-notice Forms 886-Z (C) to make certain that the total for column (3) equals 100%. The amounts shown on these forms, along with the items shown on the Schedule K-1 that have not changed, will be used by the CTFs to make the investors' recalculations.

  7. For pass-through entity taxable years ending before August 6, 1997, where penalties are at issue, columns (8) through (12) should be used to list the separate penalties and other affected items.

    1. If the penalty is agreed, show the percentage agreed upon and state "Agreed." If an affected item other than a penalty is agreed, show the amount agreed upon and state "Agreed."

    2. If the penalty or other affected item is unresolved, state " Open" but do not show a percentage or amount. See Exhibit 8.19.4-18.

  8. For partnership taxable years ending after August 5, 1997, the applicability of penalties, additions to tax and additional amounts are determined at the partnership level and are directly assessed following the partnership proceedings. Columns (8) through (12) should be used to list the separate penalties and other affected items.

    1. If the affected item is a penalty, show the percentage.

    2. If the affected item is not a penalty, show the amount agreed upon and state "Agreed;" or if the affected item is unresolved, state "Open." See Exhibit 8.19.4-15.

8.19.4.5.3  (06-01-2007)
Schedule of Adjustments (Form 870-P(AD), Form 870-PT(AD), Form 870-S(AD), Form 870-L(AD) or Form 870-LT(AD))

  1. The schedule of adjustments is the part of the agreement form that shows the pass-through entity adjustments. See IRM 8.19.1.6.10 and IRM 8.19.1.6.10.1 for a description of the agreement forms. Samples of the agreement forms are available as listed below.

    1. Sample Form 870-P(AD) - See IRM Exhibit 8.19.1-19 . See Exhibit 8.19.4-13.

    2. Sample Form 870-PT(AD) - See IRM Exhibit 8.19.1-20 . See Exhibit 8.19.4-16. (schedule of adjustments only).

    3. Sample Form 870-S(AD) - See IRM Exhibit 8.19.1-23 .

  2. The allocation of all investors must be shown on the schedule of adjustments if the correct allocation of partnership items or partner's ownership is an issue. See IRM 8.19.2.10.2. Also - See Exhibit 8.19.4-19. (allocation of partnership items). See Exhibit 8.19.4-20. (allocation of partner's ownership).

  3. If the appeals officer requests a Form 870-L(AD) or Form 870-LT(AD), the schedule also shows the affected items. Samples of the agreement forms which show affected items are available as listed below.

    1. Sample Form 870-L(AD) - See IRM Exhibit 8.19.1-21 .

    2. Sample Form 870-LT(AD) - See IRM Exhibit 8.19.1-22 and IRM Exhibit 8.19.3-2.

8.19.4.5.4  (02-08-2008)
Preparation of No Change Agreed Case Computations

  1. The no change 870-type agreement form gives notice of the completion of the administrative proceeding to all notice investors still participating in the proceedings. It allows the Service to assess partners who have filed inconsistently with the partnership return. In addition, it allows the Service to issue a notice of deficiency on the affected items requiring investor level determinations.

  2. If the appeals officer determines that there are no changes to the pass-through return, the tax computation specialist will prepare a no-change schedule of adjustments unless the partnership/S corporation items of all investors have converted to non-partnership items pursuant to IRC 6231(b) .

    Note:

    When the case is a no change, the appeals officer may also issue a no change FPAA/FSAA instead of securing no change settlement agreements from all investors. See IRM 8.19.4.7.

  3. When preparing a no change 870-type schedule of adjustments, follow the procedures found in IRM 8.19.4.5, Computations for Agreed Cases.

    1. The schedule of adjustments page of the Form 870-P , Form 870-PT, or Form 870-S will show no adjustments. See IRM Exhibit 8.19.3-8 for a sample schedule of adjustments page for a no-change settlement agreement.

    2. The no change settlement agreement package will not include Form 4605-A or Form 886-Z(C). The CTF will work from the Form 1065 and Schedules K-1.

      Note:

      Include the IRC 6404(g) key case comment on the Form 3210 (if prepared by the tax computation specialist) since there will not be a Form 4605-A on a no change. See IRM 8.19.3.7.6.

    3. See See Exhibit 8.19.4-21. This exhibit shows a sample Form 3210.

  4. For additional information on no-change cases, see IRM 8.19.3.11.

8.19.4.6  (06-01-2007)
Preparation of FPAA/FSAA

  1. The tax computation specialist will prepare the Final Partnership Administrative Adjustment (FPAA)/Final S Corporation Administrative Adjustment (FSAA), which will include the following:

    1. Letter 1830 or Letter 1828

    2. The Schedule of Adjustments page of Form 870-P, Form 870-PT or Form 870-S (IRM 8.19.4.6.1)

    3. Form 870-P, Form 870-PT or Form 870-S for the generic TMP and the named TMP (consisting of an agreement form, instructions for signing the agreement, and a schedule of adjustments)

    4. Explanation of Adjustments: See IRM 8.19.4.6.1.

    5. An "information only" page, if applicable (see IRM 8.19.4.6.3).

  2. Each page of the FPAA/FSAA (including the agreement form, instructions for signing, and the schedule of adjustments) should clearly state the page number and total number of pages in the notice, e.g. Page 1 of 4. However, the information only sheet (if applicable) is not a numbered page. See IRM 8.19.4.6.3. See Exhibit 8.19.4-22. See Exhibit 8.19.4-23.

  3. The FPAA/FSAA will be prepared as shown in IRM 8.19.3.10 and Exhibit 8.19.4-22 for partnership tax years ended after August 5, 1997. The FPAA/FSAA will be prepared as shown in IRM 8.19.3.10 and Exhibit 8.19.4-23 for pass-through entity tax years ended before August 6, 1997.

  4. As noted in IRM 8.19.3.10.2, one FPAA/FSAA is mailed to the generic TMP and one is mailed to the named TMP.

    1. On page one of the FPAA/FSAA letter to the generic TMP, the taxpayer identification number (TIN) field should either be left blank or include the TIN of the partnership.

    2. On page one of the FPAA/FSAA letter to the named TMP, the TIN field should be the TIN of the TMP, the partnership, or be left blank.

  5. The tax computation specialist will also complete the following documents:

    1. Form 4605-A (IRM 8.19.4.6.2)

    2. Penalty, Other Affected Items and IRC 6621(c) Interest Explanations, if applicable (IRM 8.19.4.6.3)

    3. Form 886-Z (C) (IRM 8.19.4.6.4)

  6. If the FPAA is mailed 120 days or less after the Notice of Beginning of Administrative Proceeding (NBAP) is issued, the appeals officer must prepare an untimely notice letter. See IRM 8.19.1.6.7.2 and IRM 8.19.3.10.4 and IRM Exhibit 8.19.1-16 and IRM 8.19.1-17.

    Note:

    Use command code TSINQP to verify the 120 day date.

  7. When Appeals will be mailing the FPAA/FSAA to the notice investors, the appeals officer may request that the tax computation specialist prepare the FPAA/FSAA letters, including the entire agreement form (with a schedule of adjustments). In this situation, dialogue will be required between the ATM of both the appeals officer and the tax computation specialists as to specifically what the tax computation specialist will prepare. The appeals officer should identify any special circumstances on the Form 3608, including parent-subsidiary relationships. The appeals officer is ultimately responsible for the accuracy and completeness of the FPAA/FSAA letters and agreement forms.

    Note:

    As noted in IRM 8.19.3.10.1(10), the preferred method of mailing the notice investor FPAA/FSAAs is by the CTF and Appeals should generally be mailing them only when there is a short statute or there are a small number of investors.

  8. The tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-5. See Exhibit 8.19.4-6. These two exhibits show sample Forms 3210.

8.19.4.6.1  (06-01-2007)
Schedule of Adjustments (Form 870-P, Form 870-PT or Form 870-S) and Explanation of Adjustments

  1. Prepare the schedule of adjustments page for Form 870-P, Form 870-PT or Form 870-S as shown on pages 8 and 9 of Exhibits 8.19.4-22 and 8.19.4-23. Only one tax year should be shown on the schedule. See IRM 8.19.1.6.10(7), Figure 1-4, and Figure 1-5 for an explanation of which form is appropriate.

  2. As noted in IRM 8.19.3.10.2, one FPAA/FSAA is mailed to the generic TMP and one is mailed to the named TMP

    1. On the Form 870-P, 870-PT or 870-S (whichever is applicable) that is included with the generic FPAA/FSAA, the TIN field should either be left blank or include the TIN of the partnership. Also, the "Name of Tax Matters Partner/Person" field should be left blank.

    2. On the Form 870-P, 870-PT or 870-S (whichever is applicable) that is included with the named TMP FPAA/FSAA, the TIN field should be the TIN of the TMP, the partnership or be left blank. The "Name of Tax Matters Partner/Person " field should include the name of the TMP.

  3. Unless otherwise directed, the tax computation specialist will use the sample paragraphs located on the TCS web site for Notices of Deficiency as guides for the explanatory paragraphs in the FPAA/FSAA. The appeals officer is responsible for providing the language for the explanatory paragraphs if the language from one of the sample paragraphs will not be used. The appeals officer is also responsible for reviewing and revising these paragraphs, as necessary.

  4. The schedule of adjustments and explanation of adjustments will include all adjustments even if some issues were settled by partial agreements for some or all of the investors.

    1. If preparing the FPAA or FSAA after a partial agreement is secured, an example of explanations of adjustments when all investors signed partial agreements is shown in Exhibit 24. See Exhibit 8.19.4-24. An example of when some investors signed partial agreements is shown in Exhibit 25. See Exhibit 8.19.4-25.

    2. For additional information on partial agreements see I IRM 8.19.3.7.3.

8.19.4.6.2  (06-01-2007)
Form 4605-A (Examination Changes—Partnerships, Fiduciaries, S Corporations. and Interest Charge Domestic International Sales Corporations)

  1. The Form 4605-A is not an attachment to the FPAA/FSAA. However, it is part of the administrative file that shows both the adjustments and corrected income/loss of the partnership. The tax computation specialist should work from the return and take into account any Forms 8082 (AAR), if applicable. The only issues that should be shown on the Form 4605-A are the ones that result in an adjustment to the amount shown on the return. See Exhibit 8.19.4-14.

    Note:

    The campuses will treat all issues not shown on the Form 4605-A as issues accepted as filed on the Form 1065 or Form 1120-S. A notation on Form 4605-A in the remarks section shall be made to notify the CTF that all issues which are not shown on the Form 886-Z (C) are accepted as shown on the Form 1065 or Form 1120-S and Schedules K-1.

  2. The tax computation specialist will prepare a new Form 4605-A only if the one in the administrative file is incorrect or has been modified by Appeals.

  3. The following information should be shown at the top or in the remarks section of Form 4605-A:

    1. "FPAA" or "FSAA," whichever is applicable

    2. "Information Only—Do Not Mail to Taxpayer"

  4. Include the IRC 6404(g) key case comment on the Form 4605-A in the remarks section and on the Form 3210. See IRM 8.19.3.7.6.

8.19.4.6.3  (02-08-2008)
Penalty, Other Affected Items and IRC Section 6621(c) Interest Explanations

  1. For pass-through entity taxable years ending before August 6, 1997, the penalties, other affected items and IRC 6621(c) interest will not be a part of the FPAA/FSAA. The FPAA/FSAA must, however, contain a determination of the underlying issues that affect the penalties or affected items at the pass-through entity level.

  2. An "information only" page (which is not a numbered page) will be included in the FPAA/FSAA mailing stating that penalties or other affected items will be raised after the TEFRA proceedings are concluded. It also advises the investors that where the only items raised in a subsequent affected item notice of deficiency are additions to tax, the Tax Court will not have jurisdiction to consider IRC 6621(c) interest unless the interest is prepaid. See IRM 8.19.1.6.9.3See Exhibit 8.19.4-23.

    Example:

    If overvaluation of assets is an issue, it can only be raised in an FPAA/FSAA to the extent it relates to a partnership item (disallowance of depreciation). See Exhibit 8.19.4-23.

  3. For partnership taxable years ending after August 5, 1997, the applicability of penalties, additions to tax and additional amounts are determined at the partnership level and are directly assessed following the partnership proceedings. An "information only" page (which is not a numbered page) will be included in the FPAA for affected items other than penalty-affected items. Include a comment in the remarks section of the schedule of adjustments that partner level defenses can be raised in a refund proceeding. See Exhibit 8.19.4-22.

8.19.4.6.4  (02-08-2008)
Form 886-Z (C) (Partners' or S Corporation Shareholders' Share of Income)

  1. A separate Form 886-Z (C) should be prepared for each tax year showing the allocation of partnership items as corrected by the FPAA/FSAA. See IRM 8.19.4.5.2. See Exhibit 8.19.4-15. See Exhibit 8.19.4-18. These exhibits contain general instructions on preparing this form. Also show the penalty or other affected item adjustments on the Form 886-Z (C).

    1. Include investors' addresses on the Form 886-Z (C) only when Appeals is mailing the FPAA to the investors.

  2. If there are non-notice investors, they should be listed together on a Form 886-Z (C) separate from the Form 886-Z (C) that lists notice investors.

  3. Only partnership items as corrected by the FPAA/FSAA which differ from the partnership items as shown on the Schedules K-1 should be on the Form 886-Z (C). It is unnecessary to show no change issues. The campuses will treat all issues not shown on the Form 886-Z (C) as correctly shown on the Schedule K-1.

    1. A notation on Form 4605-A in the remarks section may be made to notify the CTF that all issues which are not shown on the Form 886-Z (C) are accepted as shown on the Form 1065 and Schedules K-1.

  4. The TSUMYP and case file should be reviewed to distinguish between investors who have agreed (who will not receive an FPAA/FSAA) and those who will receive an FPAA/FSAA. Although the percentage of profits will equal 100%, the ordinary income (loss) shown on the Form 886-Z (C) may not reconcile to the corrected distributable income on Form 4605-A due to the difference between base amounts of agreed and unagreed investors.

  5. The following should be clearly marked on the top or in the center of Form 886-Z (C):

    1. "FPAA" or "FSAA," as appropriate

    2. "Information Only--Do Not Mail to Taxpayer"

  6. The investor information on the Form 886-Z (C) does not have to be sorted by area or territory field office. Investor returns that are filed in different areas or territories may be listed on the same page. The investors should be listed alphabetically or in TIN order.

  7. For pass-through entity taxable years ending before August 6, 1997, where penalties are at issue, columns (8) through (12) should be used to list the separate penalties and other affected items.

    1. For both penalties and other affected items, state "Open " but do not show a percentage or amount. See Exhibit 8.19.4-18.

  8. For partnership taxable years ending after August 5, 1997, the applicability of penalties, additions to tax and additional amounts are determined at the partnership level and are directly assessed following the partnership proceedings. Columns (8) through (12) should be used to list the separate penalties and other affected items.

    1. If the affected item is a penalty, show the percentage.

    2. If the affected item is other than a penalty, state "Open " but do not show a percentage or amount. See Exhibit 8.19.4-15.

8.19.4.7  (02-08-2008)
Preparation of No Change FPAA/FSAA

  1. The no change FPAA/FSAA gives notice of the completion of the administrative proceeding to all notice investors still participating in the proceedings. It allows the Service to assess partners who have filed inconsistently with the partnership return. In addition, it allows the Service to issue a notice of deficiency on the affected items requiring investor level determinations.

  2. If the appeals officer determines that there are no changes to the pass-through return, the tax computation specialist will prepare a no-change FPAA/FSAA unless the partnership/S corporation items of all investors have converted to nonpartnership items pursuant to IRC 6231(b).

    Example:

    A no change FPAA is unnecessary if all investors execute settlement agreements that state there are no changes to partnership items. See IRM 8.19.4.5.4.

  3. When preparing a no change FPAA/FSAA, follow the procedures found in IRM 8.19.4.6, Preparation of FPAA/FSAA.

    1. The schedule of adjustments page of the Form 870-P, Form 870-PT, or Form 870-S will show no adjustments. See IRM Exhibit 8.19.3-7 for a sample schedule of adjustments page for a no-change FPAA.

    2. The no change FPAA/FSAA package will not include Form 4605-A or Form 886-Z (C). The CTF will work from the Form 1065 and Schedules K-1.

      Note:

      Include the IRC 6404(g) key case comment on the Form 3210 since there will not be a Form 4605-A on a no change. See IRM 8.19.3.7.6.

    3. See Exhibit 8.19.4-7. See Exhibit 8.19.4-8. These two examples contain sample Forms 3210.

  4. For additional information on no change cases, see IRM 8.19.3.11.

8.19.4.8  (06-01-2007)
Computations for Cases in IRS Counsel Jurisdiction

  1. Docketed TEFRA key cases that are settled by Counsel require the same documents as shown in IRM 8.19.4.5 for agreed cases.

  2. Tried docketed TEFRA key cases are resolved under the rules of practice of the United States Tax Court. Tax Court Rule 155 states that Rule 155 computations determine deficiency, liability or overpayment amounts. Since there is only a determination of partnership level items and no determination of deficiency, liability or overpayment in TEFRA cases, the tax computation specialist will prepare a Rule 155 type computation, which will include the following:

    1. Summary Page showing the adjustment to the pass-through entity. See Exhibit 8.19.4-26.

    2. Form 4605-A (see IRM 8.19.4.5.1). At the top or in the remarks write "Information Only – Do Not Mail to Taxpayer" and "Tried," "Decision Entered ____________" and insert the date the decision was entered.

      Note:

      Include the IRC 6404(g) key case comment on the Form 3210 and in the remarks section of the Form 4605-A. See IRM 8.19.3.7.6.

  3. If revised tax computations are needed, the tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-9.

8.19.4.8.1  (06-01-2007)
Computations for Cases Appealed from a Tax Court Decision

  1. Docketed TEFRA key cases that are appealed from a decision of the Tax Court require Forms 4605-A and 886-Z (C) if the decision of the Tax Court is different from the FPAA/FSAA.

  2. If revised tax computations are needed, the tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-10.

8.19.4.8.2  (06-01-2007)
Computations for Cases with Final Decision After Appeal from the Tax Court

  1. Docketed TEFRA key cases that are appealed from a decision of the Tax Court require Forms 4605-A and 886-Z (C) if the decision of the final court is different from the decision of the Tax Court.

  2. If revised tax computations are needed, the tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-11.

8.19.4.9  (06-01-2007)
Computations for Cases in Department of Justice Jurisdiction

  1. When a case petitioned to the District Court or the U.S. Court of Federal Claims (or a case appealed from these courts) is final, the Department of Justice may return the case to Appeals through Counsel to complete the processing of the partnership return.

  2. The tax computation specialist may be required to prepare the Forms 4605-A and 886-Z (C).

  3. If revised tax computations are needed, the tax computation specialist will begin preparing the closing package to the CTF (including the Form 3210). See Exhibit 8.19.4-12.

8.19.4.10  (06-01-2007)
Investor Cases

  1. The Appeals Office may receive investor cases for consideration of non-TEFRA issues even if proceedings are ongoing for a TEFRA case in which the investor has an interest.

  2. Appeals will attempt to resolve the non-TEFRA issues and return the case to the CTF for processing of the TEFRA adjustments when the key case is resolved. See IRM 8.19.6.17 for procedures for Coordinated Industry Case (CIC) corporations, Joint Committee or other corporate specialty case investors.

    1. Designate the non-TEFRA issue settlement computations as a partial agreement.

  3. If the non-TEFRA issues are unagreed, the tax computation specialist will prepare a statut