Source: https://teeplehall.com/2017/01/
Timestamp: 2019-04-18 18:16:03+00:00

Document:
By admin | January 16th, 2017	| Tags: California Law, Corporate Law, IRS News, IRS Partnership Audit Rules | 0 Comments.
Roland Freasier, Jr., Esq. and Todd Douglas Hall, Esq.
Under the new rules, audit adjustments made by the IRS to items of income, gain, loss, deductions or credits are required to be made at the partnership level with the partnership liable for any resulting underpayment of tax. Under current partnership audit rules, these adjustments are all made at the partner level rather than at the partnership level. This represents a significant change.
Partnerships may elect out of the new rules if their only partners consist of individuals, estates of deceased partners or “S” or “C” corporations. (Note: It is unclear whether single member LLC are permissible partners and IRS guidance is anticipated on this issue.) They are required to issue no more than 100 Schedules K-1 and follow certain requirements as to the time and manner of making the election.
Also, under the new rules, additional taxes, penalties and interest arising from an audit are payable by the partnership. However, in lieu of the partnership paying the tax, a partnership may elect, within 45 days after receiving a notice of final partnership adjustments for an audited year, to furnish each partner in the reviewed year with a statement such as a revised Schedule K-1 of each partner’s share of each adjustment. The partner then self-assesses any added tax computed as if the adjustment had been properly reported for the reviewed year, but this assessment is reported and paid on the return for the year in which the revised Schedule K-1 is received.
A partnership which does not elect out of the new audit rules must designate a partner or another U.S. person as the Partnership Representative (Note: The Partnership Representative replaces the Tax Matters Partner). The Partnership Representative has sole authority to act on behalf of the partnership and may bind the partnership and all partners in IRS audits and in court proceedings (IRC §6223(b)).
Election out of the new audit rules is an annual election and this may be changed each year. The annual election is made on a timely filed return identifying the names and tax identification numbers of the partners and notifying each partner of the election.
Partnership agreements or operating agreement will need to be amended if election out is to be required, to require the partners of the reviewed years to reimburse the partnership for underpayments made by the partnerships in the adjustments year when the partners for the reviewed year and the adjustment year are different. Also, the procedures for selecting a Partnership Representative should be set forth in the amended partnership or operating agreement. There are other items that should be addressed in amending the partnership agreement and in the buy-sell agreements where Partnership interests are sold.
Of particular note, foreign partnerships are not included in the current changes, but the BBA and the Technical Corrections Act of 2016 propose that Treasury and the IRS will promulgate provisions for such foreign Partnership audits. (See H.R. 6439, §206(h)(10)(B)(v)).
To ensure the appropriate time necessary to evaluate the implications of this rules on a partnership and update partnership documents, as necessary, these matters should be addressed as soon as possible.
By admin | January 11th, 2017	| Tags: California Law, CCP Section 877.6, Civil Litigation, Multi-Party Litigation | 0 Comments.
In multi-party litigation, settlements become tricky when not all the parties agree to resolve the case in its entirety. On the one hand, a party should be free to resolve the matter in the party’s best interest, regardless of the interests of the other parties. On the other hand, a joint wrongdoer should not be free to shift responsibility to a co-wrongdoer by a nominal settlement. To moderate these competing interests, the law of good faith settlements has evolved so having a good litigation attorney is always in your best interest.
“The purpose of this legislation is to provide for equitable sharing of damages among the parties at fault and to encourage settlement.” Great Western Bank v. Converse Consultants, Inc. (1997) 58 Cal.App.4th 609, 613. “In addition, the offset provided for in section 877 assures that a plaintiff will not be enriched unjustly by a double recovery, collecting part of his total claim from one joint tortfeasor and all of his claim from another.” Reed v. Wilson (1999) 73 Cal.App.4th 439, 444.
Code of Civil Procedure § 877 defines the rights of all persons jointly responsible for the same wrong or the same loss. “As long as the settlement is reached before rather than after judgment …, it matters not whether the tortfeasors acted in concert to create a single injury, or successively to create distinct and divisible injuries …, or whether the injured party filed a single action against the tortfeasors.” Bob Parrett Const., Inc. v. Sup.Ct. (Northrop Grumman) (2006) 140 CA4th 1180, 1187-1188.
(c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.
The Supreme Court has suggested that section 877.6, subdivision (c) should be interpreted so as to encourage settlements. Far West Financial Corp. v. D & S Co., Inc. (1988) 46 Cal.3d 796, 810.
The California Supreme Court set forth several factors to be considered in making a good faith settlement determination. These factors are “a rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability,” “the amount paid in settlement,” “the allocation of settlement proceeds among Plaintiffs,” and “a recognition that a settlor should pay less than he would if he were found liable after trial.” Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.
Under section 877.6, if the injured party settles with one of the parties alleged to have caused its damages and the settlement is confirmed to be in good faith “other joint tortfeasors (parties who the injured party also alleges to have caused its damage) are barred from bringing equitable indemnity or contribution actions against the settling tortfeasor. This result achieves the primary objectives of section 877.6: promoting the ‘equitable sharing of costs among the parties at fault and the encouragement of settlements.’ ” (Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 877, 41 Cal.Rptr.2d 519.) Gackstetter v. Frawley (2006) 135 Cal.App.4th 1257, 1271.
Furthermore, “claims for indemnification can include other claims not labeled as indemnity claims, but that in reality are ‘disguised’ indemnity claims.” Id. (citations omitted).
Viewed differently, a good faith settlement does not eliminate separate and distinct claims of the non-settling party. “[A] good faith settlement does not bar a claim that the trial court would not contemplate in determining the proportionate liability of a settling tortfeasor. A good faith settlement would not preclude a claim by a tortfeasor who committed a tort separate and distinct from the tort committed by the settling tortfeasor. Under this circumstance, there could be no right to indemnity.” Gackstetter, supra at 1274 (citations omitted).
While the law appears clear to any litigation attorney, its application to any given multi-party settlement situation is often cloudy. Prior to the acceptance of a proposed settlement, the court will carefully analyze it in terms of reasonableness and its effect on the remaining parties. Only after the court is satisfied that the competing interests of the parties are protected will it determine that the settlement has been made in good faith.
For more information on how you can retain a knowledgeable litigation attorney contact Teeple Hall, LLC.

References: §6223
 §206
 v. 
 v. 
 § 877
 v. 
 v. 
 v. 
 v. 
 v.