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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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