Bhupindar S. and Rajinder K. Dhillon - Page 7




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               For purposes of the preceding sentence, a husband and wife             
               (and their estates) shall be treated as 1 partner.                     
               [Sec. 6231(a)(1)(B)(i).1]                                              
               Congress enacted the small partnership exception in TEFRA to           
          ensure that only "simple" partnerships would be excepted.  See              
          McKnight v. Commissioner, 99 T.C. 180, 185 (1992), affd. 7 F.3d             
          447 (5th Cir. 1993); Tax Compliance Act of 1982 and Related                 
          Legislation: Hearings on H.R. 6300 Before the House Committee on            
          Ways and Means, 97th Cong., 2d Sess. 259-261 (1982).  These                 
          simple partnerships were described in the aforesaid legislative             
          history as partnerships whose members "treat themselves as co-              
          ownerships rather than partnerships, and each co-owner resolves             
          his own tax responsibilities separately as an individual with the           
          IRS."                                                                       
               A small partnership may elect to have the TEFRA partnership            
          procedures apply.  See sec. 6231(a)(1)(B)(ii).  If made, the                
          election will apply for the taxable year of election and all                
          subsequent taxable years unless revoked with the consent of the             
          Secretary.  See McKnight v. Commissioner, supra at 185.                     
               In this case, under section 6231(a)(1)(B)(i), Executive Inn            
          is deemed to have had only two partners--petitioners as husband             


               1The above version of the statute applies to the tax years             
          1994 and 1995 involved here.  The Taxpayer Relief Act of 1997,              
          Pub. L. 105-34, sec. 1234(a), 111 Stat. 788, 1024, amended sec.             
          6231(a)(1)(B)(i), effective for partnership tax years ending                
          after Aug. 5, 1997.                                                         




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