Centralized Audit Regime Issues for Buyers and Sellers of Partnership Interests: Protecting Against Audit Risks

Under the new partnership audit rules, the IRS assesses and collects the tax resulting from partnership audits against the partnership. Advisers must carefully consider the implications of these rules on the purchase or sale of partnership interests for strategic tax planning in structuring the purchase or sale.

Generally, the partnership audit rules allow the IRS to (1) determine, assess, and collect tax on partnership underpayments at the partnership level; and (2) require the appointment of a partnership representative as the exclusive authority to represent, negotiate, and bind the partnership concerning any IRS audit procedures. Nothing within the rules provide partners the statutory right to notice or to participate in the proceedings raising concerns for buyers and sellers of partnership interests.

Tax counsel and advisers must be vigilant during the negotiation and structuring of deals involving partnership interests to establish safeguards to avoid unintended tax liability.

Listen as our panel discusses the primary challenges of structuring the purchase or sale partnership interests under the new partnership audit regime and offers perspectives on assessing audit risks and limiting tax liability.

1. Critical provisions of the new centralized audit regime
2. Authority of partnership representatives and associated risks
3. Negotiating and structuring the purchase or sale of partnership interests in light of the new audit regime
   1. Key considerations for buyers
   2. Key considerations for sellers
4. Assessing BBA audit risks and critical due diligence initiatives for buyers and sellers

The panel will review these and other key issues:

• What are the implications of the new partnership audit rules on structuring partnership mergers or acquisitions?
• What are the challenges and risks associated with the selection and authority of a partnership representative?
• What are the key considerations in the negotiation and structuring of a purchase or sale of partnerships under the new audit rules?
• What are the factors to consider in assessing BBA audit risks?
• What are the due diligence initiatives for buyers and sellers to limit potential tax liability?

Learning Objectives

After completing this course, you will be able to:

• Identify key provisions of the partnership audit regime impacting the purchase or sale of partnerships
• Recognize the risks associated with the authority granted to partnership representatives
• Ascertain critical items of interest when assessing audit risks in the purchase or sale of partnership interests
• Determine the best methods to avoid unintended tax liability for buyers and sellers

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization with supervisory authority over other preparers/accountants in preparing complex tax forms and schedules and preparing for partnership audits. Specific knowledge and understanding of partnership structures and operating agreements and IRS partnership audits. Familiarity with new partnership audit rules under the Bipartisan Budget Act of 2015.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).