Larry J. and Sherilyn Wadsworth - Page 11

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                    (A)  In general.--Except as provided in                           
               subparagraph (B), the term “partnership” means any                     
               partnership required to file a return under section                    
                    (B)  Exception for small partnerships.--                          
                   (i)  In general.--The term “partnership”                          
                    shall not include any partnership having 10 or                    
                    fewer partners each of whom is an individual                      
                    (other than a nonresident alien), a C corporation,                
                    or an estate of a deceased partner.  For purposes                 
                    of the preceding sentence, a husband and wife (and                
                    their estates) shall be treated as 1 partner.                     
               (ii)  Election to have subchapter apply.--A                            
          partnership (within the meaning of subparagraph                             
          (A)) may for any taxable year elect to have clause                          
          (i) not apply.  Such election shall apply for such                          
          taxable year and all subsequent taxable years                               
          unless revoked with the consent of the Secretary.                           
               Congress enacted the small partnership exception of section            
          6231(a)(1)(B) to ensure that only “simple” partnerships would be            
          excepted.  See McKnight v. Commissioner, 99 T.C. 180, 185 (1992),           
          affd. 7 F.3d 447 (5th Cir. 1993); Hearings on H.R. 6300 Before              
          the House Comm. on Ways and Means, 97th Cong., 2d Sess. 259-261             
          (1982) (describing “simple” partnerships as those whose partners            
          “treat themselves as co-ownerships rather than partnerships, and            
          each co-owner resolves his own tax responsibilities separately as           
          an individual with the IRS”).                                               
               For the years at issue, the temporary regulations issued               
          under section 6231 required that the election provided for in               
          section 6231(a)(1)(B)(ii) be made by attaching a statement to the           
          partnership return for the first taxable year for which the                 

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Last modified: May 25, 2011