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.

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.

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.

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.

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.

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.

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.

Refer to the following exhibits for sample Form 3210 transmittals:

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

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.

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.

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.

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.

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

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.

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.

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.

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.

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

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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).

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.

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.

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) .

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

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

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.

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

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.

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.

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.

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.

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

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.

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.

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.

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.

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).

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.

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.

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.

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

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.

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.

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.

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.

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.

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.

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.

Appeals will prepare settlement computations for non-TEFRA adjustments for all investor cases in Appeals jurisdiction. See IRM 8.19.6.

If the investor is not a CIC corporation, Joint Committee or other corporate specialty case, the CTF has the responsibility to prepare the computations for the TEFRA pass-through entity adjustments.

In a very rare instance, Appeals will make the computation and assessment of a deficiency from TEFRA adjustments when the partner is not a CIC corporation, Joint Committee or other corporate specialty case. For timely filed individual returns for tax years ending after July 22, 1998, interest is suspended if IRS fails to give notice of the liability and the basis of the liability within the time frame established by IRC 6404(g). See IRM 8.19.3.7.6 . The tax computation specialist will complete the IRC 6404(g) worksheet and include the following:

If the investor is a CIC corporation, Joint Committee or other corporate specialty case, Appeals will have the responsibility for TEFRA computational adjustments and assessments while the case is in Appeals jurisdiction.

For investors with open TEFRA linkages, Munro computations should be used for all statutory notices of deficiency and in computations for agreed docketed cases, except when the returns involved are determined to be oversheltered as described in IRM 8.19.4.11.2. See Exhibit 8.19.4-28. This exhibit shows an example of a Munro computation.

When preparing a statutory notice on a case with an open TEFRA proceeding, the following paragraph should be included on an ancillary schedule to Form 4089 (or its equivalent):

This is a sample paragraph to be included in the explanation of items:

The use of Munro in the preparation of a statutory notice may result in an inflated deficiency until treatment of the TEFRA items is finally determined. Counsel has worked out a procedure with the Tax Court whereby the tax computation on a final decision may include the TEFRA item amounts as reported on the return.

If a return is oversheltered but the non-TEFRA adjustments do result in a deficiency, issue a statutory notice of deficiency using a Munro computation instead of issuing a notice of adjustment.

An oversheltered return for the purposes of IRC 6234 is a return which:

If a return is oversheltered, a notice of adjustment is prepared for the determined non-partnership adjustments (IRC 6234(a)) if;

The determined non-partnership adjustments may be assessed as part of the computational adjustment of the partnership items following the conclusion of any TEFRA proceeding that concludes after the Notice of Adjustment is issued (IRC 6234(g)).

If a notice of adjustment is issued when a deficiency could have been determined, the notice of adjustment is considered to be a notice of deficiency (IRC 6234(h)).

The investor may allow the notice of adjustment to default since there is no immediate tax consequence. Defaulted nonpartnership adjustments may be readjusted under refund procedures. The investor may challenge the defaulted nonpartnership adjustments through a refund action if the investor is later assessed following the conclusion of the partnership proceeding (IRC 6234(d)(2)(B)).

Additional information and procedures are set forth in IRM 8.19.6.7.2.