In 1982, Congress authorized a “small partnership” exception to the definition of “partnership” in legislation designed to tighten the rules on partnership audits.1 Tax shelters were dominating the discussion in tax circles and the 1982 legislation was aimed at bolstering the oversight over partnership transactions, much of which was being carried on by limited partnerships. However, the small partnership exception, by its terms, provides an avenue for many small partnerships (including limited liability companies and limited liability partnerships) to sidestep the complexity of federal partnership tax law.