August 1, 2018Articles

The Potential Impact of the New Partnership Audit Rules

Trusts & Estates, Vol. 157, No. 8

The new partnership audit rules, originally approved by Congress under the Bipartisan Budget Act of 2015, went into effect on January 1, 2018.  These rules fundamentally change how the IRS will audit partnerships, and multi-member limited liability companies taxed as partnerships, by causing tax, interest and penalties to be collected at the partnership level, rather than at the partner level.

In light of these changes, a trustee of a trust that’s a partner of a partnership should consider amending the relevant partnership, operating or LLC agreement to provide for specific actions in order to avoid a breach of trust suit from the trust’s beneficiaries due to negative tax implications.