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more appropriately determined at the individual level because the
determination depended upon factors that could not be determined
at the corporate level and required participation of the
allegedly true owner of the shares.5 Id. at 80-81.
Second, in Grigoraci v. Commissioner, T.C. Memo. 2002-202,
we applied the stated reasoning of Hang to reach a similar
result. In Grigoraci, two partnerships were each owned by
subchapter S corporations which, in turn, were each owned by an
individual/accountant. Respondent argued that the accountants
were the actual owners/partners of the partnerships. We held
that we lacked jurisdiction in that TEFRA partnership-level
proceeding to decide that issue. We noted that the issue was a
nonpartnership item in that the partnerships could not determine
whether their corporate partners should be respected for Federal
tax purposes without consideration of information that was not
available at the partnership level; e.g., information as to the
manner in which the corporations’ activities were conducted,
whether they were properly formed, whether they had valid
purposes, and whether they actually conducted business. We also
noted that most of the evidence relevant to determining whether
the corporations or the individuals were the partners centered on
5 While a partnership reports its income on Form 1065, an S
corporation reports its income on Form 1120S, U.S. Income Tax
Return for an S Corporation. In contrast to Schedule K of
Form 1065, Schedule K to Form 1120S does not require that an S
corporation separately state its earnings from self-employment.
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