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allocated among the partners is a determination which this Court
may make in the course of a partnership-level proceeding:
SEC. 6226(f). Scope of Judicial Review.–-A court
with which a petition is filed in accordance with this
section shall have jurisdiction to determine all
partnership items of the partnership for the
partnership taxable year to which the notice of final
partnership administrative adjustment relates, the
proper allocation of such items among the partners, and
the applicability of any penalty, addition to tax, or
additional amount which relates to an adjustment to a
partnership item. [Emphasis added.]
Since the allocation of partnership items among the partners may
be resolved at the partnership level, it follows that such
allocation is itself a partnership item under the TEFRA
procedures. See Rule 240(b)(2) (defining a “partnership action”
as an “action for readjustment of partnership items” under
section 6226); see also H. Conf. Rept. 97-760, at 611 (1982),
1982-2 C.B. 600, 668 (stating that “Neither the Secretary nor the
taxpayer will be permitted to raise nonpartnership items in the
course of a partnership proceeding”).
While we agree with petitioners that the manner in which
partnership items are allocated among the partners is a
determination that must be resolved at the partnership level, we
note that respondent is not seeking to allocate the prepetition
partnership losses from Mr. Katz to one or more other partners of
record in the subject partnerships. Rather, respondent questions
the allocation of partnership losses between one partner of
record and that partner’s bankruptcy estate. Accordingly, the
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Last modified: May 25, 2011