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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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Last modified: May 25, 2011