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persons hold an interest in the partnership with respect to which
proceedings under this subchapter are conducted.” Since the S
corporations are not TEFRA entities, there is no issue of whether
the adjustments should have taken place at the S corporation
level.
C. Partner Level
Petitioners hold their interest in UK Lotto as “indirect
partners” under section 6231(a)(10). Section 6231(a)(10)
provides that an “‘indirect partner’ means a person holding an
interest in a partnership through 1 or more pass-thru partners.”
Petitioners argue that the adjustments made in the notice of
deficiency are inconsistent with respondent’s position that the
disallowed losses are affected items.
Petitioners argue that the notice of deficiency describes
only partnership items, and that the explanation of adjustment
calculates the disallowance of the loss to petitioners as if the
basis for disallowing it was a partnership level adjustment.
Petitioners therefore conclude that we are without jurisdiction
over the items in dispute because all partnership items must be
determined at the partnership level and not the partner level.
See sec. 6221.
Respondent contends that the notice of deficiency
originally refers to affected items, not partnership items.
Respondent argues that the reasons for disallowing the losses to
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Last modified: May 25, 2011