son "shall be construed to mean and include *** [inter alia] a * * * partnership". Sec. 7701(a)(1). Under section 701 a partnership generally is not "subject to the income tax"; rather, the partners are "liable for income tax only in their separate or individual capacities." But a partnership may be subject to a variety of internal revenue taxes, including, e.g., employment taxes under section 3111(a) (United States v. Hays, 877 F.2d 843 (10th Cir. 1989)) or other excise taxes (Young v. Riddell, 283 F.2d 909 (9th Cir. 1960)).

Equally important, terms such as "taxpayer" and "partnership" have certain elastic applications within the Internal Revenue Code. While a partnership generally is not subject to income taxes, concepts such as taxable income are fully applicable. Section 703(a) provides that, with exceptions: "The taxable income of a partnership shall be computed in the same manner as in the case of an individual”. In United States v. Basye, 410 U.S. 441, 448 (1973), the Supreme Court noted for the purpose of computing taxable income that "the partnership is regarded as an independently recognizable entity apart from the aggregate of its partners."

There are many examples of the term "partnership" being used in place of the word "taxpayer" or other similar designations. Section 446(a) provides: "Taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes his income in keeping his books. (Emphasis added.) For purposes of section 446, however, the "taxpayer" is the partnership. See Resnik v. Commissioner, 66 T.C. 74, 80 (1976), affd. per curiam 555 F.2d 634 (7th Cir. 1977). Section 1033(a)(2)(A) provides that "at the election of the taxpayer" a gain may not be recognized. (Emphasis added.) For section 1033 purposes, when a partnership is involved, the taxpayer is the partnership. See Demirjian v. Commissioner, 457 F.2d 1, 5 (3d Cir. 1972), affg. 54 T.C. 1691 (1970). Section 183(a) (regarding not-for-profit activities) speaks in terms of "an individual or an S corporation", but, when a partnership is involved, the so-called forprofit analysis focuses on the partnership and not the individual. See Fox v. Commissioner, 80 T.C. 972, 1006 (1983), affd. without published opinion 742 F.2d 1441 (2d Cir. 1984), affd. sub nom. Barnard v. Commissioner, 731 F.2d 230 (4th Cir. 1984). In this regard, it should be noted that the election in section 179(a) is phrased in terms of a “tax

payer may elect". Surely petitioners would not contend that an election may not be made for property in a business conducted by a partnership. For purposes of section 179(b)(3)(A), a partnership is a taxpayer.

It becomes apparent then that petitioners' dissatisfaction is not with the regulation per se, but rather with the incorporation of the section 179(b)(3)(A) limitation in section 179(d)(8). Thus, if we were to hold for petitioners, we would have to read the section 179(b)(3)(A) limitation out of section 179(d)(8). This we cannot do. Section 179(d)(8) specifically states: "In the case of a partnership, the limitations of subsection (b)" apply to the partnership and the partners. It does not say that only subsection (b)(1) and (2) shall apply. See Green v. Commissioner, T.C. Memo. 1998–356 (applying section 179(b)(3)(A) to an S corporation).

At trial petitioners also seemed to argue that the term "taxable income" as used in section 179(b)(3)(A) should be interpreted to mean gross receipts of the trade or business carried on as a partnership. This argument has no basis in law. "[T]axable income' means gross income minus the deductions allowed". Sec. 63(a). Gross income is derived from gross receipts less cost of goods sold. See Beatty v. Commissioner, 106 T.C. 268, 273 (1996); sec. 1.61–3(a), Income Tax Regs. Furthermore, as pointed out above, the determination of the taxable income of a partnership is essentially the same as with an individual. Sec. 703(a). There is no indication that in enacting the taxable income limitation in section 179(b)(3)(A) Congress did not understand and intend these terms to have their settled meaning.

In short, section 1.179-2(c)(2), Income Tax Regs., flows directly from the requirements of section 179(b)(3)(A) and (d)(8), is consistent with the statutes and their legislative histories, and is valid. Therefore, respondent's determination on this issue is sustained.

2. Section 6662 Penalty

Section 6662(a) imposes a penalty with respect "to any portion of an underpayment of tax required to be shown on a return" which is attributable to negligence or disregard of rules or regulations. Sec. 6662(b)(1). The penalty is an

amount “equal to 20 percent of the portion of the underpayment to which this section applies." Sec. 6662(a).

Petitioners claimed on Schedule C a deduction in the amount of $17,630 as "payroll taxes". Of that amount, $9,284 was payment made for petitioners' 1993 Federal income tax liability. Section 275(a)(1) provides: "No deduction shall be allowed for *** Federal income taxes". Petitioners do not dispute that the deduction of $9,284 is not allowable. The deduction is clearly prohibited by statute, and petitioner was aware that Federal income taxes cannot be deducted.

"Negligence is a lack of due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances." Freytag v. Commissioner, 89 T.C. 849, 887 (1987) (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. on this issue 43 T.C. 168 (1964) and T.C. Memo. 1964-299, cert. denied 389 U.S. 1004 (1968)), affd. 904 F.2d 1011 (5th Cir. 1990), affd. on other grounds 501 U.S. 868 (1991). The question then is whether petitioner has established that his conduct meets the reasonable or prudent person standard. See Rule 142(a); see also Freytag v. Commissioner, 89 T.C. at 887.

Petitioner argues that the deduction was the result of a reasonable mistake caused by an employee who erroneously posted the amount of the check(s) to pay Federal income taxes to the "payroll" account. We may agree that the posting mistake of the employee was understandable, but we have difficulty with petitioner's explanation. Petitioner either prepared or directly supervised the preparation of the 1994 tax return. He is an accountant, and a large part of his business related to tax matters. The $9,284 in income taxes deducted as "payroll" taxes constitutes approximately 17 percent of the taxable income of the accounting practice. Moreover, it represents 53 percent of the deduction claimed for "payroll" taxes. These are not insignificant figures, and we find it hard to believe that, when preparing or supervising the preparation of the return, petitioner would not have questioned the deduction of this size. This is particularly true because petitioner was aware that his Federal income taxes had been paid from the bank account used for the accounting practice, a practice which in and of itself is suspect. Either he closed his eyes to the facts, or he simply did not properly supervise the preparation of the return. Petitioner has not established

that he was not negligent. Therefore, respondent's determination as to the accuracy-related penalty under section 6662(a) is sustained.

Decision will be entered for respondent.

ROBERT AND LINDA YUEN, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 16025-98.

Filed March 19, 1999.

On Sept. 19, 1995, Ps filed a request for abatement of interest with R for the taxable year 1990. On Mar. 8, 1996, R notified Ps that their request for abatement of interest was denied. On Jan. 16, 1998, Ps resubmitted to R a request for abatement of interest for the taxable year 1990, presenting the same claim and basis for relief as their original request. On Apr. 1, 1998, R informed Ps that R had "rejected" Ps' attempt to resubmit their request for abatement of interest on the ground that R had considered and denied the request on Mar. 8, 1996. On Sept. 24, 1998, Ps filed a petition with the Court seeking a review of R's denial of their request for abatement of interest pursuant to sec. 6404(g), I.R.C. R moved to dismiss the petition for lack of jurisdiction. Held, the Court lacks jurisdiction under I.R.C. sec. 6404(g) to review a request for abatement of interest that was filed by the taxpayer and denied by the Commissioner prior to the effective date of sec. 6404(g), I.R.C. See White v. Commissioner, 109 T.C. 96, 99 (1997). Held, further, because Ps' original request for abatement of interest for 1990 was filed and denied prior to the effective date of sec. 6404(g), I.R.C., Ps' resubmission of their request for abatement of interest on Jan. 16, 1998, does not provide a basis for Ps to invoke the Court's jurisdiction pursuant to sec. 6404(g), I.R.C.

Robert and Linda Yuen, pro sese.

Laurel M. Robinson and Wendy Abkin, for respondent.

OPINION

COHEN, Chief Judge: This case was assigned to Chief Special Trial Judge Peter J. Panuthos pursuant to section 7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees

1 Section references are to the Internal Revenue Code, as amended. Rule references are to the Tax Court Rules of Practice and Procedure.

with and adopts the opinion of the Special Trial Judge, which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

PANUTHOS, Chief Special Trial Judge: This matter is before the Court on respondent's motion to dismiss for lack of jurisdiction. Respondent contends that the Court lacks jurisdiction under section 6404(g) to consider the petition filed in this case. As explained in greater detail below, we shall grant respondent's motion.

Background

On May 9, 1994, Robert and Linda Yuen (petitioners) filed a petition for redetermination with the Court (assigned docket No. 7495-94S) contesting a notice of deficiency that respondent had issued to petitioners for 1990. On March 15, 1995, the Court entered a stipulated decision in docket No. 7495-94S which stated that petitioners are liable for a deficiency in income tax for 1990 in the amount of $6,821 and that petitioners are not liable for the accuracy-related penalty under section 6662. The stipulated decision further stated that petitioners agreed to waive the restrictions that normally would prohibit the assessment and collection of the deficiency and statutory interest until the decision of the Tax Court was final.

On or about September 19, 1995, petitioners filed with respondent a Form 843, Claim for Refund and Request for Abatement, requesting that respondent abate interest for the taxable year 1990 in the amount of $2,453.69. Petitioners asserted in their request that the "IRS had conceded its errors during 1-18-95 meeting" and that petitioners' liability for interest for 1990 had been compromised as part of the negotiations leading to the entry of the stipulated decision in docket No. 7495-94S. Petitioners further asserted that respondent had acknowledged that the stipulated decision in docket No. 7495-94S represented a compromise of petitioners' entire tax liability for 1990 when respondent accepted petitioners' payment by check which contained the statement "compromise settlement in full”.

On or about October 23, 1995, respondent's Ogden Service Center sent a letter to petitioners stating that petitioners'