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individual partner level following the completion of partnership-
level proceedings.
The Court agreed with the Commissioner that the additions to
tax in question were affected items that could not be raised in
the partnership-level proceedings. With regard to additions to
tax for negligence, the Court stated in pertinent part:
a partner will be liable for the addition to tax for
negligence pursuant to section 6653(a) if he has an
underpayment of tax some part of which is due to
negligence. The existence of an underpayment of tax at
the partner level cannot be made until the partner's
share of distributable items of income, loss,
deduction, and credit is determined in the partnership
level proceeding. Once the partnership level
proceeding ends, however, the factual question of
whether any part of the underpayment was due to the
partner's negligence must be answered at the partner
level.
N.C.F. Energy Partners v. Commissioner, supra at 744-745.
However, in the Taxpayer Relief Act of 1997, Pub. L. 105-34,
sec. 1238(a), 111 Stat. 1026, Congress amended section 6221 to
provide that the applicability of any penalty, addition to tax,
or additional amount which relates to an adjustment to a
partnership item shall be determined at the partnership level.
H. Conf. Rept. 105-220, at 685 (1997), states in pertinent part:
Present Law
Partnership items include only items that are
required to be taken into account under the income tax
subtitle. Penalties are not partnership items since
they are contained in the procedure and administration
subtitle. As a result, penalties may only be asserted
against a partner through the application of the
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