-7-
correctly in picking the TEFRA audit procedure for JTA.
The reason for this is that Nehrlich’s challenge is a
challenge to the Commissioner’s authority to assess the increase
in tax caused by that disallowance. He asserts that JTA was a
small partnership, so that the Commissioner’s application of
TEFRA audit procedures led to an invalid assessment and any later
collection efforts were therefore improper. See Freije v.
Commissioner, 125 T.C. 14, 36 (2005) (collection actions related
to an invalid assessment may not proceed).
This is not a bad technical argument, because the Code draws
the line between small and TEFRA partnerships in a somewhat odd
way: TEFRA applies its audit procedures only to “partnership
items,” sec. 6221, which are defined to exist only with respect
to partnerships, sec. 6231(a)(3). TEFRA then defines
“partnership” to exclude small partnerships, sec. 6231(a)(1)(B),
and this then excludes them from TEFRA procedures because a small
partnership would have only nonpartnership items, see sec.
6231(a)(4); Maxwell, 87 T.C. at 788. The Commissioner can
generally challenge nonpartnership items only through the
deficiency process--as we said in Freije, the Commissioner’s
failure to show that a deduction’s disallowance fell within some
exception “to the proscription of section 6213(a) on assessments
without deficiency procedures is fatal.” Freije, 125 T.C. at 35.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: November 10, 2007