The U.S. Tax Court today issued an opinion concluding that a withholding tax liability under section 1446 was a partnership item and, as such, was properly included in a partnership-level proceeding under the TEFRA partnership audit provisions.
The case is: YA Global Investments, LP v. Commissioner, 151 T.C. No. 2 (August 8, 2018). Read the Tax Court’s opinion [PDF 52 KB]
In notices of final partnership administrative adjustment (FPAAs), the IRS determined that the partnership was liable for withholding taxes under section 1446. Adjustments were made in the FPAAs to reflect the withholding tax liabilities as well as related additions to tax and penalties.
The partnership (through the tax matters partner (TMP)) filed a petition for readjustment of partnership items, and filed a motion to dismiss for lack of jurisdiction as to nonpartnership items. The TMP argued for dismissal by the Tax Court of the issue of liability under section 1446 for lack of jurisdiction because that liability was not a partnership item and was outside the scope of the court’s jurisdiction.
The Tax Court today held that the partnership’s liability for withholding tax under section 1446 was a partnership item and therefore was properly before the court in a partnership-level proceeding.
© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.