W. Robert Curtis and Cheryl L. Riess-Curtis - Page 9

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          T.C. 1279, 1284 (1986); Maxwell v. Commissioner, 87 T.C. 783, 789           
          (1986).  Partnership items include each partner's proportionate             
          share of the partnership's aggregate items of income, gain, loss,           
          deduction, or credit.  Sec. 6231(a)(3); sec. 301.6231(a)(3)-                
          1(a)(1)(i), Proced. & Admin. Regs.                                          
               A nonpartnership item is defined as an "item which is (or is           
          treated as) not a partnership item."  Sec. 6231(a)(4).  These               
          items are subject to the general procedures applicable to audits,           
          deficiencies and refunds, and not the partnership rules.                    
               A partnership item can become a nonpartnership item in                 
          certain circumstances.  Thus, section 6231(b)(1) provides in                
          relevant part as follows:                                                   
                    (1)  IN GENERAL.--For purposes of this subchapter,                
               the partnership items of a partner for a partnership                   
               taxable year shall become nonpartnership items as of                   
               the date--                                                             
                         (A) the Secretary mails to such partner a                    
                    notice that such items shall be treated as                        
                    nonpartnership items,                                             
                              *   *   *   *   *   *   *                               
                         (C) the Secretary enters into a settlement                   
                    agreement with the partner with respect to such                   
                    items, or                                                         
               In this case there is no dispute that the loss attributable            
          to the Curtis-Hamada partnership was a partnership item at the              
          time that respondent mailed to petitioners the notice of                    
          deficiency and at the time that petitioners filed their petition            
          in respect of such notice.  Petitioners contend, however, that              
          such partnership item was converted into a nonpartnership item by           

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