Lawrence V. and Katharine T. Brookes - Page 12

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               3.  Is a Separate Deficiency Notice Required As a                      
          Prerequisite to Assessment of Partnership Items?--Normally, a               
          taxpayer’s income tax liability for each year is separate and               
          subject to resolution in a single administrative and/or legal               
          proceeding.  In 1982, Congress provided for a separate, unified             
          partnership-level proceeding, thereby creating the possibility              
          that an individual partner may be involved in two or more                   
          separate proceedings for any taxable year.  Respondent’s                    
          determinations of partnership and nonpartnership items are                  
          subject to differing notice requirements to the partners.                   
          Partners receive notices of deficiency for their nonpartnership             
          and/or affected items.  At the partnership level, the tax matters           
          partner and notice partners receive an FPAA.  The appropriate               
          notice must first be issued before respondent can assess either             
          the partnership or the nonpartnership items.                                
               Petitioners here question the separate nature of partnership           
          and partner-level proceedings vis-a-vis respondent’s ability to             
          assess a computational adjustment reflecting partnership items              
          without first issuing a notice of deficiency to the partner.  In            
          essence, petitioners contend that even though respondent issued             
          an FPAA and a partnership proceeding (in which petitioners                  
          participated) was begun and concluded, respondent must issue a              
          separate notice of deficiency to petitioners prior to assessing             
          the partnership items.                                                      

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