Crop Associates - Page 7

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          computational adjustment.  See sec. 301.6231(a)(6)-1T, Temporary            
          Proced. & Admin. Regs. (discussing computational adjustments,               
          including when the deficiency procedures apply), 52 Fed. Reg.               
          6790-6791 (Mar. 5, 1987).  Section 301.6231(a)(3)-1, Proced. &              
          Admin. Regs., implements section 6231(a)(3) by providing a list             
          of partnership items.  Equitable recoupment is not among the                
          items on that list, and, therefore, it is not a partnership item.           
          For a defense of equitable recoupment to succeed, however, the              
          partners will have to establish certain partnership items.  Each            
          partner will also have to prove that he or she has made a time-             
          barred overpayment of tax, and that is not a partnership item.              
          See sec. 301.6231(a)(3)-1, Proced. & Admin. Regs.                           
          Notwithstanding our limited jurisdiction under section 6226(f),             
          we may consider affirmative defenses in connection with the                 
          determination of partnership items.  See Rule 39; Columbia Bldg.            
          Ltd. v. Commissioner, 98 T.C. 607, 611  (1992) (considering                 
          affirmative defense of statute of limitations in a section 6226             
          partnership case on the same basis as in a deficiency case);                
          Amesbury Apartments, Ltd. v Commissioner, 95 T.C. 227, 241 (1990)           
          (considering affirmative defense of statute of limitations in               
          section 6226 partnership case).  Nevertheless, since certain                
          partner-level determinations are necessary elements to the                  
          defense of equitable recoupment, consideration of that defense in           
          this proceeding seems inconsistent with our limited jurisdiction            
          under section 6226(f).  In light of respondent’s position,                  
          discussed in the next section of this report, that equitable                

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