Amend 1065 BBA AAR or Non BBA

Forum|Forum|4 years ago
January 31, 2022
2 replies
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I need to amend our 2021 1065. We are a two person partnership LLC, filed on paper, and now need to make a change to the ordinary business income (loss) and the Schedule K-1s. I am stumped on Part I where I need to select whether or not we are BBA AAR or NON BBA. How do I determine this? I ruled out selecting TEFRA-AAR as the return in question was after 2017. Thank You!!

M-MTax

Level 15

Did you elect out?

https://www.irs.gov/businesses/partnerships/elect-out-of-the-centralized-partnership-audit-regime

Anonymous

apparently not. We are not a Qualified Opportunity Fund so we cannot answer yes to Schedule B line 25.

GeorgeM777

Level 11

The Bipartisan Budget Act (BBA) of 2015 changed how partnerships make adjustments to previously filed partnership returns. Partnerships subject to the BBA centralized partnership audit rules ordinarily must submit a filing called an administrative adjustment request (AAR) to revise a previous tax return.

The BBA applies to all partnerships unless the partnership makes a valid election out of the BBA for a partnership tax year. Partnerships subject to the BBA are referred to as BBA partnerships, while partnerships that validly elect out of the BBA are referred to as non-BBA (or BBA elect out) partnerships. Thus, if you did not make a valid election to opt out of the BBA, then in all likelihood, you are a BBA partnership. Partnerships subject to the BBA must designate a partnership representative (PR), as well as a designated individual (DI) if the designated PR is an entity, for the partnership tax year.

The most relevant consideration here is that the process for modifying a previous partnership return depends on whether the partnership is BBA or non-BBA. If a BBA partnership wishes to change the amount of one or more partnership-related items on a partnership return that has already been filed with the IRS, it ordinarily must file an administrative adjustment request (AAR). The partnership generally can no longer file an amended Form 1065 that includes amended Schedules K-1, Partner's Share of Income, Deductions, Credits, etc., as a non-BBA partnership can. Accordingly, eligible partnerships that validly elected out of the BBA can still change a previous partnership return merely by filing an amended return and do not need to submit an AAR.

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Anonymous

@GeorgeM777 thank you for this reply. If I understand correctly we cannot elect out of BBA as we are not a Qualified Opportunity Plan (question 25 on 1065 Schedule B). Rather we are a two person partnership and the income passes through to our individual 1040 forms. So further, if I understand correctly we will never be able to file the simple Amended 1065. Correct?