PARTNERSHIP AUDITS (BBA)
The Bipartisan Budget Act regime changed who is audited, who decides, and who pays. Most partnership agreements drafted before it — and a surprising number drafted after — do not account for what it does.
The partnership pays, and the current partners feel it.
The elections that change that outcome have deadlines. Missing them is a decision made by default.
Scheduling does not create an attorney-client relationship. No such relationship exists until the firm has run a conflicts check and both sides have signed a written engagement agreement.
THREE CONSEQUENCES PARTNERS DISCOVER LATE
The partnership is assessed, not the partners. An adjustment produces an imputed underpayment computed at the highest applicable rate and collected from the partnership in the adjustment year. The economic burden lands on whoever holds an interest then, not on whoever held one in the year under review.
The partnership representative acts alone. The representative’s decisions bind the partnership and every partner. There is no statutory notice-and-participation right of the kind TEFRA provided. Whatever rights the partners have are the rights their agreement gave them.
The elections have deadlines. Modification of the imputed underpayment, and the push-out election under section 6226 that moves the adjustment out to the reviewed-year partners, are each available only within defined windows. Both frequently produce a materially better result than paying at the entity level, and both are lost by inaction.
REAL ESTATE PARTNERSHIPS
Real estate is where this regime does the most damage, because the partner group changes. An adjustment to a 2022 allocation collected from the partnership in 2026 is borne by the 2026 partners, including partners who bought in afterward and excluding those who exited with the benefit. The firm handles the examination and reads the partnership agreement, because the answer to who ultimately bears the adjustment is usually in the agreement rather than in the Code.
WHAT THE FIRM DOES
Represents the partnership
and coordinates with separately represented partners where the ethics rules permit it.
Serves as or advises the PR
the one person whose decisions bind everyone else.
Files the elections in time
modification requests and push-out elections, inside their windows.
Recomputes the imputed underpayment
which is frequently overstated as first proposed.
Fixes the agreement
so the next examination does not raise these questions for the first time.
The partnership is assessed. The partners who pay are the ones holding an interest years later.
HOW AN ENGAGEMENT BEGINS
Book a free consultation
Thirty minutes, no charge. Bring the notice — we read it together on that call.
The deadline is identified
Which notice it is, what it asserts, and which forums are still open behind it.
Conflicts check and written engagement
Scope and fee agreed in writing before any work begins.
HOW A CONTROVERSY RESOLVES
The firm takes over
Correspondence with the Service runs through the firm. You stop answering.
The position is built and pressed
Records, authority, and the argument — pressed at the earliest stage that will take it, because that is the cheapest place to win.
Resolution
Closed at examination, settled at Appeals on the hazards, or tried. The firm does not hand the file to anyone to reach the last of those.
The elections that improve the outcome are the ones with deadlines. Contact the firm through the contact page or call (561) 529-5873. Representative engagements are described on the Experience page.