Notice 2019-66: Partnership Tax Compliance Increase

Notice 2019-66:  Partnership Tax Compliance Increase

The IRS released the Notice 2019-66 (the “Notice”) which may substantially increase the compliance requirement for partnerships effective for partnership tax years beginning in 2020.  The Notice requires following disclosures in the partnership tax returns:

  • Tax basis capital accounts, including negative tax basis capital accounts on a partner-by-partner basis.  The disclosure will enable the IRS to easily identify and quantify taxable distributions and/or disposition of partnership interest by a partner.
  • Partner’s share of net unrecognized Section 704(c) gain or loss on a partner-by-partner basis.  Under this requirement, partnerships are required to compute and disclose each partner’s built-in gains or losses, enabling the IRS to see proper allocation of related gains and losses between partners when triggered.
  • Partner’s Section 465 “at-risk activities” on a partner-by-partner basis.  Such disclosure will enhance the application of Section 465 at-risk limitation by partners.

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