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Following the settlement, the Commissioner computed the
taxpayer's income tax liability for 1982, taking into account
partnership items, to be equal to the tax due on an increase in
income of $30,065. This figure represented the difference
between $100,000 (the loss that the taxpayer claimed on its 1982
return) less $69,935 (the taxpayer's distributive share of
partnership loss under the settlement). In addition, after
eliminating the partnership loss that the taxpayer carried
forward from 1982 to 1983, the Commissioner determined that the
taxpayer owed additional income tax for 1983.
The Commissioner later assessed the taxes described above as
computational adjustments. In a subsequent refund action, the
taxpayer claimed that the Commissioner erred in treating the
above-described adjustments as computational adjustments, rather
than as adjustments requiring factual determinations at the
partner level. The United States District Court for the Western
District of Texas, citing Maxwell v. Commissioner, 87 T.C. 783
(1986), and Harris v. Commissioner, supra, agreed with the
Commissioner that the adjustments were properly treated as
affected items subject to computational adjustment. In rejecting
the taxpayer's argument that the adjustments required factual
determinations at the partner level, the District Court pointed
out that the Commissioner did not adjust any other items on the
taxpayer's returns nor did the taxpayer dispute the dollar amount
of the adjustments that the Commissioner made to its 1983 tax
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