-8-
This argument, though, rests entirely on whether JTA met
TEFRA’s definition of a “small partnership.” See sec.
6231(a)(1)(B). For the 1995 tax year, this definition set two
tests. The first was whether JTA had ten or fewer partners, each
of whom was a natural person or the estate of a dead partner.
Sec. 6231(a)(1)(B)(i)(I). The Commissioner concedes JTA passed
this test.
The second test for the 1995 tax year was whether JTA
allocated each item to each partner the same way. This “same-
share” requirement meant, for example, that a one-third partner
had to get one-third of the partnership’s income and deductions;
if he got one-third of the income, but one-half of even one of
the deductions, the partnership would be subjected to TEFRA.5
Sec. 6231(a)(1)(B)(i)(II). Nehrlich claims that the Commissioner
was wrong to flunk JTA on the same-share test. He reasons that a
partnership’s “guaranteed payments”6 were not subject to the
same-share requirement, and that JTA’s health insurance premiums
were “guaranteed payments.” Nehrlich is correct that guaranteed
payments are not one of the items used in a same-share analysis.
See sec. 301.6231(a)(1)-1T(a)(3), Temporary Proced. & Admin.
5 The same-share requirement was removed from section
6231(a)(1)(B)(i) by the Taxpayer Relief Act of 1997, Pub. L. 105-
34, sec. 1234(a), 111 Stat. 1024.
6 Guaranteed payments are payments made to a partner without
regard to the partnership's income. Sec. 707(c).
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Last modified: November 10, 2007