If a CAP Program taxpayer owns an interest in a partnership, completed business transactions involving the partnership can be worked in pre-filing only if the CAP Program taxpayer owns 100% of the partnership, either directly or indirectly. If the CAP Program taxpayer does not own 100% of the partnership, the completed business transactions of the partnership cannot be worked until the partnership return is filed.
The rationale behind this is to ensure that the tax treatment of the transactions is not affected by future events and to maintain consistency and fairness in the treatment of taxpayers. The CAP Program aims to resolve issues prior to the filing of the tax return by reviewing completed business transactions in real-time, but this is contingent on the taxpayer's full ownership of the partnership to ensure that all relevant facts and circumstances are fully disclosed and agreed upon by both the IRS and the taxpayer.
Sources:
Rev. Proc. 2022-9
§ 704. Partner’s distributive share
PMTA 01233
