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and any error in the computational adjustment must be challenged
in a refund suit. See sec. 6230(c); see also sec. 6231(a)(5)
(defining “affected item” as “any item to the extent such item is
affected by a partnership item”). If an increased liability
stemming from an affected item requires a factual determination
at the partner level, however, the normal deficiency procedures
outlined in sections 6212 and 6213 apply, and the Commissioner
must issue an affected items notice of deficiency to the partner
in order to assess tax attributable to the affected item. See
sec. 6230(a)(2)(A)(i); see also sec. 301.6231(a)(6)-1T(a)(2),
Temporary Proced. & Admin. Regs., 64 Fed. Reg. 3840 (Jan. 26,
1999).12
As to respondent’s determination in the affected items
notice of deficiency concerning the long-term capital gain, the
parties dispute whether that computational adjustment required a
factual determination at the partner level. Petitioners argue
12 Sec. 301.6231(a)(6)-1T(a)(2), Temporary Proced. & Admin.
Regs., 64 Fed. Reg. 3840 (Jan. 26, 1999), states:
(2) Changes in a partner’s tax liability with
respect to affected items that require partner level
determinations (such as a partner’s at-risk amount to
the extent it depends upon the source from which the
partner obtained the funds that the partner contributed
to the partnership) are computational adjustments
subject to deficiency procedures. Nevertheless, any
penalty, addition to tax, or additional amount that
relates to an adjustment to a partnership item may be
directly assessed following a partnership proceeding,
based on determinations in that proceeding, regardless
of whether partner level determinations are required.
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