10
With these guidelines in mind, we turn to the facts of the
instant cases. We first consider whether Makalu falls within the
small partnership exception, and, as such, was not subject to the
unified audit and litigation procedures for 1985. During the
taxable years 1985 through 1988, Makalu consisted of two
partners, petitioner and Murray Tucker (Tucker). Each owned .5-
percent share of Makalu as a limited partner, and 49.5-percent
share as a general partner.
Makalu's Form 1065 (partnership return) for 1985 reflects
only one item; an ordinary loss of $50,176. The Schedules K-1 of
petitioner and Tucker, attached to the Form 1065, indicate that
the net loss was allocated to the partners according to the
aforementioned percentages:
Partner Status Percent Ownership Loss Assigned Percent Loss
Petitioner GP .5 $251 .5
Tucker GP .5 251 .5
Petitioner LP 49.5 24,837 49.5
Tucker LP 49.5 24,837 49.5
The Schedules K-1, attached to Forms 1065 for taxable years 1986
through 1988, also reflect a single item of ordinary loss or loss
from rental real estate activities and corresponding allocations.
As we stated in Z-tron Computer Program v. Commissioner,
supra at 263, "An allocation to a partner of a share of
partnership net or 'bottom line' taxable income or loss is an
allocation to such partner of the same share of each item of
income, gain, loss, and deduction that is taken into account in
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