Partnership Termination

[Acownt4it]

Partnership terminated on 3/1/06 and didn't file the return until 2/1/07. They have been assessed a late filing penalty.
Any body know if I can get this penalty waived?

[OldJack]

You might get a better response if you mentioned what calendar year tax return was not filed until 2/1/07.

[Jesse]

I am assuming it is tax year 2006 you are questioning, with a short tax year vs a calander tax year. Is there reasonable cause or 10 or fewer partners that can meet the reasonable cause test listed in the Tax Book pg 20-1?

[Acownt4it]

You might get a better response if you mentioned what calendar year tax return was not filed until 2/1/07.

this is for calendar year 2006.

[OldJack]

Maybe the reasonable cause is the tax partner relied upon a professional tax preparer that did not know the return was due within the 4½ months from the date of termination.

[Acownt4it]

Thank you, that is exactly what I was looking for.

[Bees Knees]

Maybe the reasonable cause is the tax partner relied upon a professional tax preparer that did not know the return was due within the 4½ months from the date of termination.

Your reasonable cause can be I didn't feel like filing. I was busy watching TV.

As long as there are 10 or fewer partners, there is no penalty for failing to file a 1065, assuming all partners file their 1040s correctly using the correct K-1 flow through items.

[OldJack]

Your reasonable cause can be I didn't feel like filing. I was busy watching TV.

As long as there are 10 or fewer partners, there is no penalty for failing to file a 1065, assuming all partners file their 1040s correctly using the correct K-1 flow through items.

I guess it just show how foolish the IRS is to even send a penalty notice to a 1065 filer. I would love to see a case where your reasonable cause would be accepted by the IRS. I would expect that claiming the filing exception provision at this stage would be to little, to late. But then, I am not an IRS employee that would deal with such matters.

[Acownt4it]

Thanks to all that replied.

I called the IRS and the agent was very helpful. He gave me specific instructions that qualify for the Small Partnership Exception Rule as written in the TB pg. 20-1(Thanks Jesse), with one exception.

There are four criteria's, not three. TB Editors may want to look into this, I did not look up the specific code to see if there are four; IRS Code 6231(a)(1)(B). But the agent said number the fourth is:
Each partner must own the same percentage of all items in the partnership.

This does not mean that each partnership % must be equal, just that each indivdual partner must have the same % ownership in the assets, liabilities, profit and losses.

[outwest]

If you really want to understand this small partnership..

reasonable cause exception, here is a very thorough discussion of law history and requirements:

http://www.irs.gov/pub/irs-sca/0135029.pdf