                  T.C. Memo. 1999-214



                UNITED STATES TAX COURT



 BHUPINDAR S. AND RAJINDER K. DHILLON, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 16971-98.                      Filed July 1, 1999.



     R filed a motion to dismiss for lack of jurisdiction on
the ground that Ps did not file their petition for
redetermination within the time prescribed by sec. 6213(a),
I.R.C. Ps, 50-percent partners in E, contend that their
petition was timely filed. Ps argue that the extended time
for filing a petition under sec. 6226(b)(1), I.R.C., of the
partnership audit and litigation procedures, secs. 6221-
6232, I.R.C., enacted as part of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, sec. 402(a), 96
Stat. 648 (TEFRA partnership procedures), governs the period
for filing the petition because R's adjustments in the
notice of deficiency relate to adjustments of flow-through
partnership items of E.

     Held: E is a "small partnership" under sec.
6231(a)(1)(B)(i), I.R.C., and is therefore not a partnership
covered by the TEFRA partnership procedures. Thus, the
extended period for filing a petition for redetermination
under sec. 6226(b)(1), I.R.C., does not apply in this case.
                                 - 2 -


          Held, further, since Ps did not file their petition
     within the time prescribed by sec. 6213(a), I.R.C., R's
     motion to dismiss for lack of jurisdiction is granted.



     Craig M. Hunt, for petitioners.

     LaVonne D. Lawson, for respondent.



                         MEMORANDUM OPINION

     NIMS, Judge: This matter is before the Court on respondent's

motion to dismiss for lack of jurisdiction on the ground that

petitioners did not file their petition within the time

prescribed by section 6213(a).    In reply to respondent's motion

to dismiss, petitioners assert that the period for filing the

petition under section 6213(a) is inapplicable.   Instead,

petitioners argue that their petition was timely filed pursuant

to section 6226(b)(1).   (Section references are to sections of

the Internal Revenue Code in effect for the years in issue.)

                             Background

     The relevant facts are not in dispute and may be summarized

as follows.   Petitioners resided in San Jose, California, when

they filed their petition.

     Petitioners were general partners in a partnership named B&R

Dhillon Et Al Ptrs, d.b.a. Executive Inn (Executive Inn).

Petitioners' Schedules K-1, Partner's Share of Income, Credits,

Deductions, Etc., attached to their 1994 and 1995 Federal income
                                - 3 -


tax returns, indicate that they held an aggregate 50-percent

interest in profits, losses, and capital of Executive Inn during

the 1994 and 1995 taxable years.    Kenneth and Rosemary Manrao

were the other general partners and held the remaining 50-percent

interest in profits, losses, and capital during the 1994 and 1995

taxable years.    Executive Inn operated a motel in Campbell,

California.

     Petitioners filed their 1994 and 1995 Federal income tax

returns on September 6 and October 30, 1996, respectively.      On

June 2, 1998, respondent mailed to petitioners a Form 4605,

Examination Changes - Partnerships, Fiduciaries, Small Business

Corporations, and Interest Charge Domestic International Sales

Corporations, which proposed adjustments to Executive Inn's 1994,

1995, and 1996 taxable years.    Respondent timely mailed the

notice of deficiency for petitioners' 1994 and 1995 taxable years

on July 17, 1998.    Petitioners mailed their petition on October

16, 1998; the petition was filed on October 20, 1998.

                             Discussion

     Section 6213(a) provides that a petition must be filed

within 90 days (or 150 days if the notice is addressed to a

person outside the United States) after the notice of deficiency

is mailed.    In this case, respondent mailed the notice of

deficiency on July 17, 1998.    Ninety days after the mailing of

the notice of deficiency was October 15, 1998.    Petitioners
                                - 4 -


mailed their petition on October 16, 1998, and it was filed on

October 20, 1998.   The petition was, therefore, not timely filed

if section 6213(a) applies.

     Petitioners argue, however, that section 6213(a) is

inapplicable in this case.    According to petitioners, since

respondent's determinations in the notice of deficiency arose

from adjustments relating to their partnership interest in

Executive Inn, the extended time for filing a petition under

section 6226(b)(1) of the partnership audit and litigation

procedures, secs. 6221-6233, enacted in 1982 as part of the Tax

Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-

248, sec. 402(a), 96 Stat. 648 (TEFRA partnership procedures),

governs the time period for filing the petition.

     Under the TEFRA partnership procedures, "the tax treatment

of any partnership item shall be determined at the partnership

level."   Sec. 6221.   "A partner's treatment of partnership items

on the partner's return may not be changed except as provided in

sections 6222 through 6231 of the Code and the regulations

thereunder."   Sec. 301.6221-1T(a), Temporary Proced. & Admin.

Regs., 52 Fed. Reg. 6779, 6781 (Mar. 5, 1987).    The TEFRA

partnership procedures were designed to "provide a method for

uniformly adjusting items of partnership income, loss, deduction,

or credit that affect each partner."    Harrell v. Commissioner, 91

T.C. 242, 243 (1988).   "Congress decided that no longer would a
                                - 5 -


partner's tax liability be determined uniquely but 'the tax

treatment of any partnership item [would] be determined at the

partnership level.'"   Maxwell v. Commissioner, 87 T.C. 783, 787

(1986) (citing section 6621).

     Pursuant to section 6226(b)(1), any notice partner may file

a petition "within 60 days after the close of the 90-day period

set forth in subsection (a)".   Subsection (a) of section 6226

states in pertinent part:

          (a) Petition by Tax Matters Partner.--Within 90 days
     after the day on which a notice of a final partnership
     administrative adjustment is mailed to the tax matters
     partner, the tax matters partner may file a petition for a
     readjustment of the partnership items for such taxable year
     with--
               (1) the Tax Court,

Section 6231(a)(8) defines a "notice partner" as a "partner who,

at the time in question, would be entitled to notice under

subsection (a) of section 6223 (determined without regard to

subsections (b)(2) and (e)(1)(B) thereof)."   Section 6223(a)

provides:

          (a) Secretary Must Give Partners Notice of Beginning
     and Completion of Administrative Proceedings.--The Secretary
     shall mail to each partner whose name and address is
     furnished to the Secretary notice of--

                 (1) the beginning of an administrative proceeding
            at the partnership level with respect to a partnership
            item, and

                 (2) the final partnership administrative
            adjustment resulting from such proceeding.
                                 - 6 -


     A partner shall not be entitled to any notice under this
     subsection unless the Secretary has received (at least 30
     days before it is mailed to the tax matters partner)
     sufficient information to enable the Secretary to determine
     that such partner is entitled to such notice and to provide
     such notice to such partner.

Subsections (b)(2) and (e)(1)(B) of section 6223 involve special

rules relating to partnerships with more than 100 partners and

are not pertinent here.   Since petitioners have furnished their

names and address to the Secretary, petitioners fit within the

definition of a "notice partner" if the TEFRA partnership

procedures apply.   See sec. 6231(a)(8).

     Therefore, if the TEFRA partnership procedures apply, then

petitioners would have no less than 90 days after respondent

mails the notice of final partnership administrative adjustment

(FPAA) to file their petition.

     Respondent argues that the TEFRA partnership procedures do

not cover Executive Inn because Executive Inn falls within the

"small partnership" exception.    See sec. 6231(a)(1)(B).   A small

partnership is excepted from these procedures, provided that--

          (I) such partnership has 10 or fewer partners each of
     whom is a natural person (other than a nonresident alien) or
     an estate, and

          (II) each partner's share of each partnership item is
     the same as his share of every other item.
                               - 7 -


     For purposes of the preceding sentence, a husband and wife
     (and their estates) shall be treated as 1 partner.
     [Sec. 6231(a)(1)(B)(i).1]

     Congress enacted the small partnership exception in TEFRA 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); Tax Compliance Act of 1982 and Related

Legislation: Hearings on H.R. 6300 Before the House Committee on

Ways and Means, 97th Cong., 2d Sess. 259-261 (1982).    These

simple partnerships were described in the aforesaid legislative

history as partnerships whose members "treat themselves as co-

ownerships rather than partnerships, and each co-owner resolves

his own tax responsibilities separately as an individual with the

IRS."

     A small partnership may elect to have the TEFRA partnership

procedures apply.   See sec. 6231(a)(1)(B)(ii).   If made, the

election will apply for the taxable year of election and all

subsequent taxable years unless revoked with the consent of the

Secretary.   See McKnight v. Commissioner, supra at 185.

     In this case, under section 6231(a)(1)(B)(i), Executive Inn

is deemed to have had only two partners--petitioners as husband



     1
      The above version of the statute applies to the tax years
1994 and 1995 involved here. The Taxpayer Relief Act of 1997,
Pub. L. 105-34, sec. 1234(a), 111 Stat. 788, 1024, amended sec.
6231(a)(1)(B)(i), effective for partnership tax years ending
after Aug. 5, 1997.
                                 - 8 -


and wife, and Kenneth and Rosemary Manrao as husband and wife--

thereby meeting the first requirement of the small partnership

exception.   See sec. 6231(a)(1)(B)(i)(I).   Furthermore, there is

no indication that Executive Inn filed an election under section

6231(a)(1)(B)(ii) to be treated as a partnership for purposes of

the TEFRA partnership procedures.    In fact, Executive Inn

indicated on Schedule B of its Form 1065, U.S. Partnership Return

of Income, line 4, for the 1994 and 1995 taxable years that it

was not subject to the consolidated audit procedures of sections

6221 through 6233.

     The remaining question, therefore, is whether the second

requirement that each partner's share of each partnership item

was the same as his share of every other item has been satisfied.

See sec. 6231(a)(1)(B)(i)(II).    Section 301.6231(a)(1)-1T(a)(3),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6789 (Mar. 5,

1987), provides in pertinent part:

           (3) "Same share." The requirement of section
     6231(a)(1)(B)(i)(II) is satisfied for a taxable year if
     during all periods within that taxable year each partner's
     share of each of the partnership items specified in §
     301.6231(a)(3)-1(a)(1)(i) through (iv) is the same as that
     partner's share of each of the other partnership items
     specified in that section during that period (even though
     the partner's share of all such specified partnership items
     changes from period to period within that taxable year)
     * * *

The partnership items referred to in these regulations are:
                                - 9 -


          (i) Items of income, gain, loss, deduction, or credit
     of the partnership;

         (ii) Expenditures by the partnership not deductible in
     computing its taxable income (for example, charitable
     contributions);

        (iii) Items of the partnership which may be tax
     preference items under section 57(a) for any partner;

         (iv) Income of the partnership exempt from tax.
     [Sec. 301.6231(a)(3)-1(a)(1), Proced. & Admin. Regs.]

The "same share" requirement is determined annually, see sec.

301.6231(a)(1)-1T(a)(4), Temporary Proced. & Admin. Regs., 52

Fed. Reg. at 6789, "by examining the partnership return and the

corresponding Schedules K-1, and any amendments thereto received

prior to" the commencement date of respondent's audit of the

partnership.    Harrell v. Commissioner, 91 T.C. at 246; see also

Z-Tron Computer Research & Dev. Program v. Commissioner, 91 T.C.

258, 262 (1988).      As previously noted, petitioners' Schedules

K-1 reflect that they had a 50-percent interest in partnership

profits, losses, and capital for the 1994 and 1995 taxable years.

Executive Inn's Forms 1065, for the 1994 and 1995 taxable years

reflect partnership ordinary income of $48,773 and $124,282,

respectively.   The only partnership item listed on petitioners'

Schedules K-1 for the 1994 and 1995 taxable years is ordinary

income from trade or business activities.   There is no indication

that petitioners had filed amendments to these forms prior to

commencement of the partnership audit.   In accordance with their
                                - 10 -


50-percent interest in partnership profits, losses, and capital,

petitioners' distributive share of Executive Inn's ordinary

income was 50 percent for both 1994 and 1995, $24,387 ($24,386.50

rounded to the nearest dollar) and $62,141, respectively.

Executive Inn has therefore satisfied the "same share"

requirement of section 6231(a)(1)(B)(i)(II).

     Based on the foregoing, we hold that Executive Inn falls

within the small partnership exception under section

6231(a)(1)(B)(i), and is therefore not covered by the TEFRA

partnership procedures.     Accordingly, the extended time period

for filing a petition for redetermination under section

6226(b)(1) of the TEFRA partnership procedures does not apply in

this case.

     Petitioners argue that Congress could not have intended that

the small partnership exception would apply under these

circumstances.    According to petitioners, respondent is abusing

the small partnership exception by using it as an excuse to

abandon a complex "partnership level examination and then to

issue a deficiency notice at the partner level (i.e., effectively

limiting challenge to the 'modifications' of partnership

income)".    We disagree.   Section 6231(a)(1)(B) simply codifies

Congress' intent to exempt simple partnerships, like Executive

Inn, from the TEFRA partnership procedures.     See McKnight v.

Commissioner, 99 T.C. at 185; H. Conf. Rept. 97-760 (1982), 1982-
                              - 11 -


2 C.B. 667.   As noted above, partners in simple partnerships,

like petitioners, resolve their "own tax responsibilities

separately as [individuals] with the IRS", McKnight v.

Commissioner, 99 T.C. at 185; see Tax Compliance Act of 1982 and

Related Legislation: Hearings on H.R. 6300 Before the House

Committee on Ways and Means, 97th Cong., 2d Sess. 260 (1982)

(Statement of John S. Nolan, Chairman, Section of Taxation,

American Bar Association).

     Furthermore, petitioners had the right, which they have

attempted to exercise in this case, to challenge respondent's

determinations resulting from modifications to partnership income

by filing a petition for redetermination within 90 days of the

mailing of the notice of deficiency.   See sec. 6213(a).

Petitioners have only themselves to blame for the fact that we

lack jurisdiction over this matter because of their untimely

filing.

     Petitioners further argue that the provisions of subchapter

K (sections 701 through 761) and the definitions set forth in

section 7701(a)(2) (defining the terms "Partnership and Partner")

and (14) (defining the term "Taxpayer") somehow mandate the

application of the TEFRA partnership procedures in this case.    As

noted above, the TEFRA partnership procedures "provide a method

for uniformly adjusting items of partnership income, loss,

deduction, or credit that affect each partner".   Harrell v.
                                - 12 -


Commissioner, 91 T.C. at 243.    The provisions of subchapter K,

which dictate the substantive determination of a partner's tax

liability, do not in any way affect these procedures.

     Furthermore, the definitions set forth in section 7701(a)

apply only "where not otherwise distinctly expressed or

manifestly incompatible with the intent thereof--".    In this

case, the term "partnership" has been specifically defined for

purposes of the TEFRA partnership procedures in section

6231(a)(1).   Therefore, petitioners' reliance on section

7701(a)(2) and (14) is misplaced.

     Petitioners' remaining arguments are either meritless or are

mooted by our holding that the TEFRA partnership procedures do

not apply.

     Since petitioners filed their petition more than 90 days

after the mailing of the deficiency notice, respondent's motion

to dismiss for lack of jurisdiction will be granted.

     To reflect the foregoing,

                                      An appropriate order of

                                 dismissal will be entered.
