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“partner level determination”.10 An affected item is defined as
any item “affected by a partnership item.” Sec. 6231(a)(5). The
Grigoracis’ liability for self-employment tax on the distributive
share from GTWP under section 1402(a) requires a determination
that Mr. Grigoraci was the true and actual partner in GTWP - a
partner level determination. Accordingly, any deficiency
attributable to self-employment tax on the distributive share
from GTWP requires respondent to issue an affected items notice
of deficiency. The deficiency determined by respondent is only
partially attributable to self-employment tax on the distributive
share from GTWP.
In the notice of deficiency respondent recharacterized the
$92,470 distributive share the Grigoracis reported as being from
Grigoraci S Corporation as actually being from GTWP. Respondent
then determined that the $92,470 was personal service income
subject to self-employment tax. In addition, respondent
determined that the $32,000 of wages the Grigoracis reported as
earned from Grigoraci S Corporation was actually “personal
service income” subject to self-employment tax. Thus, the
10 We agree with respondent that affected item notices of
deficiency can only be issued to a partner. For these purposes,
sec. 6231(a)(2) defines a partner as either (1) a partner in the
partnership or (2) any other person whose income tax liability is
determined directly or indirectly by taking partnership items
into account. As so defined, Mr. Grigoraci is a partner in GTWP.
Either he is an actual partner in GTWP or Grigoraci S Corporation
is the partner and Mr. Grigoraci is its sole shareholder. In the
latter case, Mr. Grigoraci’s income would be determined
indirectly by taking partnership items into account.
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