Wow, sorry Clay, I totally missed this sir. I recall on this particular return, I elected out of the regime which is the reason why I called the IRS, instead of sending the letter.
But, now that we can't get anyone at the IRS to answer their phones, I will pose your question to the board so we all understand. If a Partnership elects out of the Audit Regime and the 1065 is filed late, but the Partners filed their returns timely (extensions included), and all partners are individuals, will the Partnership be eligible for reasonable cause relief under Rev Proc 84-35?
This puts the Partnership at an advantage IF the 1065 has yet to be filed, and the extended due date is still valid for the individual partners. Just check or uncheck the box and move forward with filing the 1065 late, request relief and Bob is your Uncle!
Clay, it is my understanding the election out of the Audit Regime must be done in a timely manner, which is the crux of this issue. If the 1065 is filed late, the election out of the Regime is not available, thereby potentially (depending on the meaning of the Rev Proc's wording) making the 84-35 relief moot, if it is the case that you must elect out of the Regime to obtain relief provided in the Rev Proc.
Here is the Rev Proc language we are referring to: "The partnership has not elected to be subject to the consolidated audit procedures under IRC 6221 through IRC 6233." Does this mean the election out precludes the relief? It sounds like the IRS is saying, if you elect out of the regime, you do not qualify for relief under Rev Proc 84-35. Anyone here agree/disagree?