Form 872 - Revised IRS form addresses carryforwards attributable to TEFRA partnerships 

February 28:  The IRS recently issued an updated version of Form 872, Consent to Extend the Time to Assess Tax (Rev. January 2014), that includes new language extending the period of limitations on assessment for adjustments affecting a subsequent year (“carryforward year”) to the year for which the statute is extended (“source year”).

The new provision applies only to taxpayers who hold an interest (directly or indirectly) in any partnership subject to Subchapter C of Chapter 63 of the Code (partnerships subject to the TEFRA provisions under sections 6221-6234) with respect to deficiencies resulting from adjustments to partnership items, affected items, computation adjustments and partnership items converted to nonpartnership items—i.e, TEFRA adjustments—reported in the source year that affect the carryforward year.

The new language in Form 872 provides that with respect to TEFRA adjustments:

Additionally, this agreement extends the period of limitations for assessing any tax (including penalties, additions to tax, and interest) relating to any amounts carried over from the taxable year specified in paragraph (1) to any other taxable year(s).

Read the revised Form 872 [PDF 44 KB]


Section 6501(c)(4) provides authority for the IRS and a taxpayer to agree to extend the period of time for assessment of tax under the Code.

Importantly, any agreement pursuant to section 6501(c)(4) to extend the period of assessment of tax imposed by the Code creates an extension for filing a claim for refund claim for six months after the end of the agreed period for assessment. See section 6511(c)(1).

Section 6511(d) provides for an extended period of limitations in the case of a loss or credit carryback, but not for a loss or credit carryforwards.

Revised Form 872

The inclusion of the new language on Form 872 will allow the IRS to assess additional tax for carryforward years resulting from TEFRA adjustments that are otherwise barred from assessment under section 6501 if the source year is still open by agreement under section 6501(c)(4).

Likewise, the new language will give taxpayers additional time to obtain a credit or refund resulting from the carryforward of TEFRA adjustments to carryforward years that would otherwise be closed under section 6511—notwithstanding the fact that the source year of the TEFRA adjustments is still open under section 6511(c)(1) pursuant to agreement under section 6501(c)(4).

Taxpayers that are partners in a TEFRA partnership previously could find their refund claim with respect to carryover adjustments to a subsequent year to be barred absent anticipating the need for and undertaking protective measures. Protective measures undertaken by taxpayers include executing a Form 872 for the carryforward year or filing a protective refund claim before the period of limitations expires for the carryforward year.

KPMG observation

Unfortunately, the modification of Form 872 only extends the period of limitation for refund for taxpayers who hold an interest in a TEFRA partnership and only with respect to TEFRA adjustments. The modification to Form 872 does not apply to other taxpayers who must continue to monitor and undertake protective measures with respect to carryover adjustments to subsequent years.

For more information, contact a KPMG tax professional:

Mike Dolan

(202) 533-6150

Sharon Katz-Pearlman

(212) 872-6084

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year