The tax treatment of partnership items.

How to Determine Their Correct Treatment When a Return Is Audited

The majority of tax professionals welcomed the passage of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which required the IRS to conduct audits at the partnership level in order to change the tax treatment of partnership items. Under pre-TEFRA law, a tax professional representing a partner on the audit of the partner's individual tax return was often confronted with an agent proposing changes in the tax treatment of partnership items. All too often, both the tax professional and the individual partnership lacked the information necessary to determine the proper tax treatment of the item. The only response to the agent was that the item had been reported in conformity with the partner's K-1 provided by the partnership.

To solve this dilemma, the TEFRA added Secs. 6221-6232 to the the Code,(1) providing for the audit of partnership items to be conducted during an examination of the partnership rather than during an examination of individual partners' returns. "Partnership items" are income, deductions, gains, losses and credits that are determined by regulation to be more properly determined at the partnership level.(2) Nonpartnership items, on the other hand, are items of income that are properly determined on the individual taxpayer level. The importance of making a distinction between the two is evident. However, this separation of partnership and nonpartnership items is not as easy as it might first appear since there are some items relating to the partnership that can best be determined by the individual and are characterized as nonpartnership items.

In addition to facing the dilemma of which items must be audited at the partnership level and which items must be audited at the individual level, tax professionals are faced with a second dilemma. What happens to an individual taxpayer who receives a Schedule K-1 from a partnership concerning a partnership item and the individual disagrees with the partnership's characterization or treatment of that item? Should the partner report the item as the partnership reported it, believing the treatment is incorrect? Should the partner correct the item, and, if so, is the partner obligated to inform the IRS about the correction?

This article will examine the distinctions between partnership items and nonpartnership items and discuss the procedures to follow when a partner determines that a partnership item is reported incorrectly. The rules affect partnerships formed after Sept. 3, 1982.(3)

Partnership Items vs. Nonpartnership Items

As stated earlier, partnership items are audited at the partnership level; nonpartnership items are audited at the partner level.(4) A partnership item is defined as "any item required to be taken into account for the partnership's taxable year under any provision of subtitle A to the extent [provided by] regulations...."(5) Accordingly, only those items found in subtitle A are considered to be partnership items.(6)

Example 1: On Oct. 3, 1990, the IRS issued a Final Partnership Administrative Adjustment (FPAA) to the A Partnership. The partners filed a petition contesting the FPAA--specifically, the Service's determination that certain items resulted from tax-motivated transactions defined in then applicable Sec. 6621(c). The Service stated that the Sec. 6621 item was not a partnership item since Sec. 6621 is listed in subtitle F. The court agreed, stating that subtitle F "is not within [its] scope of review in a partnership level proceeding."(7)

Not all items found in subtitle A are considered to be partnership items. To be a partnership item, it must be shown that the item is more appropriately determined at the partnership level than at the partner level.(8) The chart on page 565 lists certain partnership items. It must be stressed that this list is not all inclusive; there may be other items that occur in the operation of a partnership that constitute "partnership items." Note that partnership items are those that have an impact on a partnership computation, election or other partnership determination. When deciding whether or not an item is classified as a partnership item, it is important to ask whether the partnership will use the item to make any determination affecting partnership property, partnership income (separately stated or nonseparately stated) or partnership elections. The characterization of an item as a partnership item can best be shown by the following examples.

Example 2: Individual F transfers $20,000 in cash and equipment with a value of $40,000 and an adjusted basis of $30,000 to the ZXC Partnership. The first question the partnership must answer is whether the transaction constitutes a contribution, a sale, a loan or any combination of the three. If the transaction, in whole or in part, constitutes a contribution, the partnership must determine the amount of the contribution and the partnership's basis in any property contributed. To the extent that an item is necessary for the partnership to make the determinations it is required to make, that item is classified as a partnership item; otherwise it is not.

Example 3: In 19X1, the MNB Partnership contributes land and takes a charitable contribution. In 19X3, the land is returned to the partnership. The partnership must recognize income under the tax benefit rule. This determination is made in a partnership level proceeding.(9)

Example 4: The ERK Partnership transfers land to H, one of its partners. The partnership must determine if the transaction is a distribution, a sale or a repayment of a loan. If ERK determines that the transaction is a sale, Sec. 707(a) will apply. The items used by the partnership in its determination that the transaction constituted a sale are characterized as partnership items.

Example 5: Assume the same facts as in Example 4. In addition, H pays for the land by using appreciated stock. H must determine the adjusted basis of the stock in order to determine his gain. However, this information is not needed by the partnership and any item used in H's determination is not considered to be a partnership item.

Warning: Be sure that a partnership item is attributed to the correct partnership.

Example 6: Partnership A incurred certain deductions that it passed to one of its partners, partnership B. A was audited and no one objected to the disallowance of the deductions it claimed. B is subsequently audited and the Service disallows deductions passed to it by A. B's partners object. The items in question are partnership items that must be determined at a partnership proceeding. However, they are A's items. Since no objection was made to their disallowance, all partners, including B and its partners, are bound by the audit of A.(10)

Care must be taken not to confuse "partnership items" with "affected items." "Affected items" " are those that are tied to a partner's adjusted gross income (AGI) and are directly affected by adjustments in partnership items.(11) Nonpartnership items that are affected by the tax determination of partnership items include the medical expense deduction, the personal casualty loss deduction and any itemized deduction subject to the 2% floor.

Example 7: N is a partner in the WSX Partnership. WSX has informed N that as a result of a recent audit by the Service, his distributive share of partnership profits for 19X1 has increased by $10,000. N had $1,500 of investment expenses that are subject to the 2% floor. Before the audit, N had stated his AGI as $40,000. Therefore, he had claimed $700 of the investment expenses ($1,500 -- (2% of $40,000)). After the audit his AGI is $50,000, which limits the deduction to $500 ($1,500 - (2% of $50,000)). This deduction is treated as an affected item and is subject to the partnership-level proceedings. The Service need not proceed against N in an individual examination for any deficiency pertaining to the reduced deduction.

Under the regulations, the following items are also treated as "affected items."

1. The portion of the partner's basis in his partnership interest that is a nonpartnership item.(12)

2. The portion of a partner's at-risk limitation for partnership losses that is not a partnership item.(13)

3. Civil penalties that are imposed against a partnership under Secs. 6651-6665 because of an underpaid or understated partnership item.(14)

To determine the amount of the "affected items" in applying item 3, it is necessary to know if a "floor" is involved in the application of the civil penalty. A "floor" is a threshold amount of underpayment or understatement necessary before the addition to tax or additional amount is imposed. If the additional amount does not contain a floor, the imposition of the civil penalty on a partner as the result of an adjustment of a partnership item is considered to be an "affected item" as computed with respect to the entire amount.

Example 8: A, a partnership of P, had an aggregate underpayment of $1,000, of which $200 is attributable to an adjustment to partnership items and $800 is attributable to an adjustment of nonpartnership items. A is negligent in reporting the partnership items. The additional tax for negligence is computed on the entire $1,000 underpayment. The entire negligence penalty amount is an "affected item."

If the additional amount contains a floor that is already exceeded before considering the partnership adjustment, the "affected items" include only the additional amount computed with reference to the partnership item.

Example 9: B is a partner in the QWE Partnership. B understates her income tax liability attributable to nonpartnership items by $12,000. An adjustment to a partnership item resulting from a partnership audit increases her tax liability by an additional $4,000. Even without the adjustment of the partnership item, B would have been subject to a civil tax penalty. Accordingly, the additional penalty amount imposed on the $4,000 item is treated as an "affected item." The additional penalty amount imposed on the $12,000 is not an "affected item."

If the additional penalty amount contains a floor, but the partner's understatement, prior to the adjustment of a partnership item, does not exceed that floor, the affected item includes the additional tax or amount computed with respect to the entire underpayment or understatement.

Example 10: C is a partner in the JPT Partnership. C understates his income tax liability attributable to nonpartnership items by $4,000. As the result of a partnership audit, that understatement is increased to $10,000. Before the partnership audit, C was not subject to any additional penalty tax; after the audit, he is. The additional penalty tax computed with respect to the entire $10,000 is an "affected item."

A change in the tax liability of a partner as a result of a partnership-level audit is made through a computational adjustment. This computational adjustment may reflect a change in the tax liability brought about by changes in "affected items" caused by partnership adjustments. If a change can be made to the affected item without making a further partner-level determination, the change is made through the computational adjustment. For example, this occurs when the partnership item increases a partner's AGI and a change must be made to the partner's medical expense deduction. However, some affected items, such as the "at-risk" limitations, may require a determination at the partner level and no computational adjustment can be made without such a determination.(15)

Example 11: The limited partners of the JHK Partnership enter into an agreement with a third party to limit their liability on certain property leased to the third party. The Service audits a limited partner's return and disallows partnership losses because the limited partner is not a risk. The limited partner says such determination must be made at the partnership level. The Service successfully argues that the agreement is between the limited partners and the third party. Since neither the partnership nor the general partner is party to the agreement, the item is not a partnership item or an affected item requiring a partnership-level determination.(16) However, if the agreement with the third party had included the partnership, a different result may have followed.

Consistent Treatment of Partnership Items

Sec. 6222(a) requires the partner to report all partnership items in a manner consistent with the treatment of such items on the partnership tax return. However, Sec. 6222 can place both the partner and the partnership in a no-win situation if a partnership disagrees with the partnership on the proper reporting of partnership items. In other words, the partner believes the partnership return and his K-1 are incorrectly prepared, no doubt increasing his present or future tax liability.

Tax planning: To avoid future problems, any disagreements between a partner and the partnership on the reporting of partnership items should be reconciled "in house." Before a partner files his return, the preparer of the partnership return should be given an opportunity to explain his reasoning for the position reported on the return. Agreement among the parties, resulting in an informed partner or the filing of an amended partnership tax return, is preferable to the possible consequences of informing the Service of a partner's "inconsistent treatment."

If agreement cannot be reached and the amount is material to the individual partner, the partner has no alternative but to report the item in what he believes to be the correct manner and inform the Service of his "consistency."(17) Warning: Be aware that the partner's action has greatly increased the possibility of an audit of the returns for all parties involved.

If the item is not reported in a consistent manner and notice is not given by the partner, the Service may make a computational adjustment and assess a deficiency without conducting a separate audit of the partnership.(18) The Service may then collect the additional tax necessary to make the partner's treatment of the item consistent with the partnership's treatment of the items. In other words, the partner's inconsistent treatment, together with his failure to file a notice of such treatment, results in the forfeit of his right to challenge the tax associated with the inconsistent reporting. He can seek an administrative or judicial review only after paying the tax deficiency and filing a claim for refund. (Note: As a practical matter this problem does not exist if the inconsistent treatment causes the partner to pay more tax.)

Example 12: Partnership ASD incurred certain start-up costs, which it capitalized. Partner A, a partner in ASD, deducted his proportionate share of these start-up costs. A's treatment of this partnership item is inconsistent with the treatment of this partnership item on ASD's partnership tax return. No notice of inconsistent treatment was filed with the return. The Service can seek immediate payment of the tax deficiency.

If the partner in question is an indirect partner, the consistency requirement is applied with respect to the source partnership, i.e., the partnership from which the partnership item originates.(19)

Example 13: The RPT Partnership reports $100,000 as the distributive share of M Corp., which is one of its partners. M, an S corporation with two equal shareholders, reports only $60,000 as its distributive share of income from RPT. H, a shareholder in M, reports $30,000 as his distributive share of partnership income. H is subject to a computational adjustment to conform the treatment of that item on M's tax return to the treatment of that item on the return of the "source partnership," RPT.(20)

Example 14: Assume the same facts as in Example 13, except that H is aware that M's distributive share of income reported on RPT's return was $100,000. As a result, H reported $50,000 as his distributive share of partnership income. H is treated as reporting the partnership item in a consistent manner with the source partnership, RPT.(21)

If the partner notifies the Service of his inconsistent treatment of a partnership item, the partner will not be subject to an automatic adjustment. Form 8082, Notice of Inconsistent Treatment or Amended Return (Administrative Adjustment Request (AAR)), which should accompany the partner's tax return, is used to notify the Service of the inconsistency. In addition, if no partnership return has been filed and no K-1 has been received from the partnership, a partner should file a Form 8082. Warning: In order to meet the consistency requirement, a partner must report a partnership item in a manner consistent with the source partnership. This becomes complicated when there are passthrough partners, such as trusts and estates, that report partnership items to indirect partners. If the passthrough partner reports a partnership item in an inconsistent manner, the indirect partner will not meet the consistency requirement if he reports the item in a manner that is consistent with the passthrough partner but inconsistent with the source partnership. Either the passthrough partner or the indirect partner must give notice of inconsistent treatment.(22)

Example 15: The QWE Partnership reports $40,000 as the distributive share of a family trust, which is one of its partners. The trust is certain that $25,000 is the correct amount. Therefore, the trust reports distributive net income of only $25,000 on its tax return, which is distributed to B, the trust's sole beneficiary. As a result, B reports only $25,000 on her tax return. B will not be subject to an automatic assessment so long as either she or the trust reports the inconsistency by filing Form 8082.

Example 16: Assume the same facts as in Example 15, except that although B reports the $25,000, neither she nor the trust files the Form 8082. The Service may then make a computational adjustment.

Note: A partner may file an AAR for any partnership tax year at any time within three years of (1) the date on which the partnership return for such year is filed or (2) the last day for filing the partnership return for such year without regard to extensions, whichever is later. However, the request must be made before the FPAA notice is mailed to the tax matters partner.(23)

A partner filing Form 8082 to notify the Service of an inconsistency in reporting must be careful to report all reporting inconsistencies. The partner is protected from automatic assessment only on the specific partnership items that are reported.(24)

Example 17: S is a partner in the ISX Partnership. She reports a deduction and a capital gain in a manner inconsistent with the treatment of those items by the partnership. S reports the inconsistent treatment of the capital gain but not of the deduction. S is subject to an automatic adjustment with respect to the deduction.(25)

An interesting scenario occurs when the Schedule K-1 and any schedules sent to the partner by the partnership differ from the partnership return that was filed. The consistency requirement requires the partner to report partnership items on his return in a manner consistent with the treatment of those items on the partnership return. It is obvious that the treatment on the two returns will not agree and the Service will treat the matter as a situation of inconsistent reporting without required notice being given. The Service will issue a notice of computational adjustment seeking payment of the tax deficiency. At this time, the partner needs to write to the Service to establish the facts of the situation. A partner is considered to have complied with the consistency requirement if he elects to do so and can demonstrate that the treatment of the item in question is consistent with the treatment of the item on the schedule prescribed by the Service and furnished to the partner by the partnership, showing the partner's share of income, gain, loss, deduction and credits. This election is made by filing a statement with the Service office issuing the notice of computational adjustment within 30 days after the notice is mailed to the partner. Usually the election is made by sending to the IRS copies of the partnership Schedule K-1 and other schedules received along with a copy of the notice of the computational adjustment.(26)

If a partner notifies the IRS of the inconsistent treatment of a partnership item, the Service cannot seek payment of the resultant tax deficiency through automatic assessment. The IRS may take one of three actions.

1. Do nothing and accept the return with the reported inconsistency as filed,

2. Conduct a partnership level proceeding, or

3. Notify the partner that all partnership items arising from that partnership will be treated as nonpartnership items and begin to audit the return.(27)

It is unlikely that the Service will select the first option if the tax impact of the inconsistent treatment is significant. The practical problem with the second and third options is that the Service may not be willing to concern itself with only the inconsistent item once the examination has begun. There is nothing to prevent the Service from auditing everything on the return. Once again, communication between the partner and the partnership to resolve the inconsistencies "in house" promises a better result than asking the IRS to resolve the conflict.

Planning strategy: If the partner must report partnership items in an inconsistent manner, he is in a better position if he notifies the Service of the inconsistency that if he assumes it will not be noticed. By notifying the Service, he has preserved his right to seek both administrative review and judicial review of any tax assessment before making any additional payment.

Small Partnership Exception

It is easy to see that the rules for making adjustments on partnership items are complicated and often confusing. However, they are the only way to resolve disputes with large partnerships. Certain partnership are not subject to these complicated rules if they meet the requirements of the small partnership exception. Some of these "small partnerships" may actually be major business concerns and report large amounts of taxable income. The Code defines "small partnerships" on the basis of number of partners rather than on measurements of business size (such as number of employees, gross revenues or net taxable income). "Small partnership" are subject to the partnership-level audit rules only if they so elect. However, once they elect, that election remains in effect for all future years unless the Service consents to a request for revocation of the election.(28)

A "small partnership" is any partnership that meets both the "10 or fewer" and "same share" requirements. The "10 or fewer" requirement is met if the partnership has 10 or fewer partners at all times during the partnership tax year, each of whom is a natural person (other than a nonresident alien) or an estate.

Example 18: The ABC Partnership is owned by 10 individuals on Jan. 19X1. On May 15, A sells his entire interest to N. ABC meets the "10 or fewer" requirement for the entire year of 19X1. While it is true that 11 individuals owned an interest in the partnership during 19X1, no more than 10 individuals owned an interest at one time during 19X1.

The "10 or fewer" requirement specifies that the partners must be natural persons or an estate. If a partnership interest is owned by a passthrough entity, other than an estate, during any part of the tax year, the partnership will not meet the requirement.(29)

For purposes of counting the partners for the "10 or fewer" requirement, a husband and wife (and their estates) are treated as one partner.

Example 19: On Jan. 1, 19X1, the G Partnership is owned 26% by Mr. G, 25% by Mrs. G, and 49% by nine long-term employees. Mr. G died on Nov. 4, 19X1. His partnership interest passed to his estate. Since Mr. and Mrs. G and Mr. G's estate are treated as one partner, there were 10 partners for all of 19X1.

The "same share" requirement is met if each partner's share of each partnership item is the same as his share of every other item. Once again, a husband and wife (and their estates) are considered to be one partner. In applying this requirement, one needs to break the tax year into periods if a partner's share of partnership items has changed due to a sale, redemption or contribution.(30)

Example 20: M is a 40% partner in the XYZ Partnership. From Jan. 1, 19X1 to May 31, 19X1, his share of all partnership items is 40%. On June 1, 19X1, M sells half of his interest to D. Thereafter, his share of all partnership items is 20%. XYZ satisfies the "same share" requirement.

Special allocations of contributed property under Sec. 704(c) and special basis adjustments under Secs. 734, 743 and 754 do not violate the "same share" requirement.

Example 21: A is a 30% partner in the HIJ Partnership. His share of all partnership items is also 30%. At the time HIJ was formed, A contributed land with an adjusted basis of $50,000 and a fair market value of $90,000. In 19X2, the land is sold for $190,000. By applying Sec. 704(c), the first $40,000 in gain is allocated to A. He will then be allocated 30% of the remaining $100,000 of gain. HIJ satisfies the "same share" requirement for 19X2 even though a Sec. 704(c) allocation occurred during the year.

Each year a partnership must meet the requirements of a "small partnership" to be excluded from the partnership-level audit rules for that tax year. A partnership may be classified as a small partnership for one tax year but fail to meet the requirements for other tax years.

A "small partnership" must elect to be subject to the partnership-level audit rules. The election is made by attaching a statement to the partnership tax return for the first tax year for which the election is to be effective. The election must be signed by all persons who were partners of the partnership at any time during the partnership tax year to which the return relates. The election will be effective for the tax year to which the return relates and all subsequent partnership tax years, unless revoked with IRS consent.(31)

Warning: A small partnership is subject to the partnership-audit rules only if it so elects. If no election is made, any adjustment of a partnership item may be made on the return of a partner without first auditing the partnership.

Possible Future Legislation

The Tax Fairness and Economic Growth Act of 1992, which was vetoed by President Bush, contained provisions that would have changed some of the audit rules pertaining to partnerships.(32) Legislation is currently pending (HR 11) that would add several new Code sections to subchapter K, relating to partnerships and partners. The new rules, proposed Secs. 771-777, would apply to large partnerships of 250 or more partners, and to partnerships with 100 or more partners who elect to be treated as a large partnership. However, most personal service partnerships would be excluded from the definition of a large partnership. Once a partnership is considered to be a large partnership, there is a simplified list of flowthrough items. The taxable income of a large partnership would be computed in the same manner as that of an individual, with certain modifications.

In addition, the bill would create new audit procedures for large partnerships. A partner would not be allowed to report a partnership item in an inconsistent manner. The IRS would no longer be required to give notice to individual partners of the start of an administrative proceeding or a final adjustment. Due process would be served merely by mailing notice (by certified or registered mail) of a proceeding to the partnership's last known address. Partnership items would be determined at the partnership level. Adjudication of disputes concerning partnership items would remain basically the same. However, only the partnership, not the partners, could petition for a readjustment of partnership items. If a petition for readjustment is filed by the partnership, the court with which the petition is filed would have jurisdiction to determine the tax treatment of all partnership items. The court's jurisdiction would not be limited to those items listed in the notice filed by the IRS. Absent an agreement to the contrary, the IRS would not adjust a partnership item of a large partnership more than three years after the later of (1) the filing of the partnership return or (2) the last day for filing the partnership return. The new law, if passed will apply to partnership tax years ending on or after Dec. 31, 1992.

Conclusion

The legislation proposed in HR 11 is extensive; thus its progress and content should be monitored closely. However, the bill will apply only to large partnerships. Current law will still apply to small partnerships and to personal service partnerships.

Under current law, it is important to remember that if a partner reports a partnership item in a manner consistent with the item's treatment, and the Service decides that the treatment is incorrect, it cannot make any adjustments with respect to the incorrect items without auditing the partnership itself. If a partner reports partnership income in a manner inconsistent with the treatment of that item of the partnership's return, the partner must notify the Service of the inconsistent treatment. Small partnerships that wish to be subject to the partnership audit rules may do so by attaching a statement to the partnership return for the first tax year for which the election is to be effective. This election is effective for all future years unless one of the requirements is violated or unless it is revoked with the consent of the IRS.

Partnership Items(*)

1. Items of income, gain, loss, deduction or credit of the partnership. 2. Guaranteed payments. 3. Partnership expenditures not deductible in computing the partnership's taxable income (e.g., charitable contributions). 4. Partnership's contributions. 5. Partnership distributions. 6. Partnership items that may the be tax preference items for any partner. 7. Tax-exempt partnership income. 8. Partnership liabilities (including not only the amount of the liability but whether the liability is nonrecourse, and changes from the preceding tax year). 9. Amounts used to determine the following:

a. Recapture of investment tax credit.

b. At-risk limitation required by Sec. 465.

c. The depletion allowance under Sec. 613A with respect to oil and

gas wells.

d. The application of Sec. 751(a) and (b) relating to a partner's interest

in a partnership's unrealized receivables or inventory items that

have substantially appreciated in value.

e. Investment tax credit. 10. Optional adjustments to the basis of partnership property (Sec. 754). 11. Items arising between a partnership and a partner who is not acting in his capacity as a partner (Sec. 707(a)). (*) From Regs. Sec. 301.6231(a)(3)-1(a). (1) TEFRA Section 402(a). (2) Regs. Sec. 301.6231(a)(3)-1(a)(1)(i). (3) TEFRA Section 407. See also August C. Wolf, TC Memo 1991-212. (4) Larry S. Maxwell, 87 TC 783 (1986). See also (as quoted in the case) H. Rep. No. 97-760, 97th Cong., 2d Sess. 609, 611 (1982). (5) Sec. 6231(a)(3). (6) Affiliated Equipment Leasing II, 97 TC 575 (1991). (7) Adapted from Affiliated Equipment Leasing II, id., at 578. (8) Regs. Sec. 301.6231(a)(3)-1(a). (9) Adapted from 885 Investment Co., 95 TC 156 (1990). (10) Adapted from Sente Investment Club Partnership of Utah, 95 TC 243 (1990). (11) Sec. 6231(a)(5). (12) Temp. Regs. Sec. 301.6231(a)(5)-1T(b). (13) Temp. Regs. Sec. 301.6231(a)(5)-1T(c). (14) Temp. Regs. Sec. 301.6231(a)(5)-1T(d). (15) Temp. Regs. Sec. 301.6231(a)(6)-1T. (16) Adapted from Leroy G. Roberts, 94 TC 853 (1990). (17) Sec. 6222(b). (18) Temp. Regs. Sec. 301.6222(b)-2T. (19) Temp. Regs. Sec. 301.6222(a)-2T(c). (20) Adapted from Temp. Regs. Sec. 301.6222(a)-2T(d), Example 1. (21) Adapted from Temp. Regs. Sec. 301.6222(a)-2T(d), Example 5. (22) Temp. Regs. Sec. 301.6222(a)-2T(c)(1) and (3). (23) Sec. 6227(a). (24) Temp. Regs. Sec. 301.6222(b)-2T(b). (25) Adapted from Temp. Regs. Sec. 301.6222(b)-2T(b), Example. (26) Temp. Regs. Sec. 301.6222(b)-3T. (27) Temp. Regs. Sec. 301.6222(b)-2T(a). (28) Sec. 6231(a)(1)(B). (29) Temp. Regs. Sec. 301.6231(a)(1)-1T(a)(2). (30) Temp. Regs. Sec. 301.6231(a)(1)-1T(a)(3); see Sam A. McKnight, TC Memo 1991-514. (31) Temp. Regs. Sec. 301.6231(a)(1)-1T(c). (32) S 1395 and HR 2777.

M. Jill Lockwood Martin, J.D., LL.M., CPA Professor of Accounting School of Business Georgia Southern University Statesboro, Ga. Spence Wise, MBA, CPA Assistant Professor of Accounting School of Business Georgia Southern University Statesboro, Ga.