Dennis L. and Sharon E. Hayden - Page 7

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               Petitioners contend that, since for purposes of the section             
          179(b)(3)(A) limitation they may aggregate taxable incomes from              
          their different trades or businesses, they should be able to                 
          aggregate their taxable income with the income of the partnership            
          under section 179(d)(8) to determine the partnership's taxable               
          income.  In this regard, petitioners argue that section                      
          179(b)(3)(A) applies only to the taxable income "of the taxpayer"            
          derived from the trade or business "by the taxpayer".                        
          Petitioners contend that under section 701 a partnership is not a            
          taxpayer; therefore, that section cannot apply to a partnership.             
          The taxable income limitation in section 179(b)(3)(A) is,                    
          therefore, meaningless when applied to a partnership, and section            
          1.179-2(c)(2), Income Tax Regs., is accordingly invalid.                     
               The gravamen of petitioners' argument is that a partnership             
          is not a taxpayer under the definition contained in section                  
          7701(a)(14).  It should be noted initially that this is literally            
          incorrect.  A taxpayer is defined as "any person subject to any              
          internal revenue tax."  Sec. 7701(a)(14).  In turn, a person                 
          "shall be construed to mean and include * * * [inter alia] a                 
          * * * partnership".  Sec. 7701(a)(1).  Under section 701 a                   
          partnership generally is not "subject to the income tax", rather             
          the partners are "liable for income tax only in their separate or            
          individual capacities."  But, a partnership may be subject to a              
          variety of internal revenue taxes, including, e.g., employment               
          taxes under section 3111(a) (United States v. Hays, 877 F.2d 843             

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