-7- to the extent that the income was allocated to limited partners, estates, trusts, corporations, exempt organizations, or IRAs. See the 1999 Instructions to Form 1065, at 23-24. Petitioner argues that the reporting of LTD’s ordinary income as NESE is within our jurisdiction because it is a characterization of partnership income that is a partnership item under section 6231(a)(3). According to petitioner, LTD had no NESE in that neither it nor any of its partners had a partner or member who was an individual. Petitioner asserts more specifically that none of the three individuals was a partner and asks the Court to decide the same. Petitioner asserts that the identity of LTD’s actual partners also may affect the allocation of income among those partners, another indicium of a partnership item under section 6231(a)(3). See infra p. 11. LTD paid salaries and fringe benefits to the three individuals, and as petitioner sees it, section 707 would operate to disallow LTD’s deduction of the payroll taxes paid on the salaries and to treat the fringe benefits as guaranteed payments, if the three individuals were in fact partners of LTD. Respondent argues that the Court’s jurisdiction as to the issue at hand is narrower than that espoused by petitioner. According to respondent, the Court in a TEFRA partnership-level proceeding may decide only the amount of a partnership’s NESE as ascertained mechanically under the instructions to Form 1065. InPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011