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Kate Kraus talks with Tax Notes about the risk that in litigating a dispute with the IRS under the BBA partnership audit rules, the partners might win the case but nevertheless have to pay the full amount in dispute. Under some of the “modification rules” of the BBA, a partnership may reduce the amount it must pay if the partners amend their tax returns and pay any additional amount of tax that may be due. The problem is that the partners must pay the additional tax before the issues are resolved. If the partners litigate the issues and prevail in court, they should be entitled to a refund of the excess tax that they paid. Unfortunately, the deadline for filing a refund claim might have already passed by that time. The BBA rules do not ensure that the deadline will be extended to take into account the time needed to litigate the dispute.
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