Victor Grigoraci and Judith A. Grigoraci, et al. - Page 19




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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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