4
partnership exception of section 6231(a) and, thus, all issues
should be determined at the partner level. See sec. 6221.
Congress enacted the partnership audit and litigation
procedures to provide a method for uniformly adjusting items of
partnership income, loss, deduction, or credit that affect each
partner. Congress decided that no longer would a partner's tax
liability be determined uniquely, but the tax treatment of any
partnership item would be determined at the partnership level.
Harrell v. Commissioner, supra at 243 (citing Maxwell v.
Commissioner, 87 T.C. 783, 787 (1986)).
Section 6231(a)(1)(B) excludes certain small partnerships
from the partnership audit and litigation provisions unless the
partnership elects to have such provisions apply. The relevant
portion of this section provides as follows:
(B) Exception for small partnerships.--
(i) In general. -- The term "partnership" shall not
include any partnership if--
(I) such partnership has 10 or fewer partners each of
whom is a natural person (other than a nonresident
alien) or an estate, and
(II) each partner's share of each partnership item is
the same as his share of every other item.
For purposes of the preceding sentence, a husband and wife
(and their estates) shall be treated as 1 partner.
Petitioners concede that Westco and Makalu had 10 or fewer
partners during the relevant periods. The dispute of the parties
centers upon the applicability of section 6231(a)(1)(B)(i)(II) to
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