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partnership.1 Its partners were Deerbrook Construction, Inc.--
the tax matters partner (TMP)2--and four Wilkerson family trusts.
Jim Wilkerson and his son Dennis owned another piece of
property along the San Jacinto River, and in 1997 they noticed
that there was a sand-and-gravel operation mining land adjacent
to this other property. They investigated, and learned that the
mine’s operator was paying royalties to the landowner. This made
them wonder if their own property might have some sand or gravel
too. Sand and gravel deposits are detected, and their volume
estimated, by taking core samples. The Wilkersons decided to
have core samples taken from their land next to the already
operating sand-and-gravel mine. But that coring turned up only
the sand-and-gravel equivalent of a dry hole. The Wilkersons
didn’t give up--they suspected that they might be luckier with
the Hamblen Road property. And they were right. Geotest
1 Unless otherwise noted, all section references are to the
Internal Revenue Code in effect for 1998; all Rule references are
to the Tax Court Rules of Practice and Procedure.
TEFRA is the Tax Equity and Fiscal Responsibility Act of
1982, Pub. L. 97-248, 96 Stat. 324, one part of which governs the
tax treatment and audit procedures for most partnerships. See
TEFRA secs. 401-407, 96 Stat. at 648-671. TEFRA requires that
all “partnership items”--a term defined by section 6231(a)(3) and
(4)--be determined at the partnership level; its general goal is
to have a single point of adjustment during an audit rather than
making separate adjustments for each partner. See H. Conf. Rept.
97-760, at 599-601 (1982), 1982-2 C.B. 600, 662-63.
2 Each TEFRA partnership is supposed to designate one of its
partners as the “tax matters partner” to handle TEFRA issues and
litigation for the partnership.
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Last modified: November 10, 2007