PRIA, Government Policy, Made Personal

Summary

If an error listed in section 1312 cannot be fixed right away because another law or legal rule stops it, the IRS must fix the effect of that error later by making an adjustment in the amount and way described in section 1314. The IRS can only make that adjustment if certain conditions are met. Except for the special cases in section 1312(3)(B) and 1312(4), an adjustment is allowed only when there is an inconsistent position adopted in the determination: if the adjustment would give a refund or credit, the IRS must have taken the opposite position; if the adjustment would lead to extra tax being assessed and collected, the taxpayer must have taken the opposite position. For a case under section 1312(3)(B) (certain income exclusions), the adjustment is allowed only if a deficiency assessment for that year was not barred when the IRS first argued inclusion in a notice of deficiency or before the Tax Court. For a case under section 1312(4) (disallowed deductions or credits), the adjustment is allowed only if a refund or credit was not barred when the taxpayer first wrote to the IRS or the Tax Court claiming the deduction or credit. When the adjustment would be collected like a deficiency (except for 1312(3)(B) cases), it cannot be applied to a related taxpayer unless that relationship existed when the original inconsistent position was first taken in a return, refund claim, or Tax Court petition, or if there was none, at the time of the determination.

Title 26, §1311

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule

If a determination (as defined in section 1313) is described in one or more of the paragraphs of section 1312 and, on the date of the determination, correction of the effect of the error referred to in the applicable paragraph of section 1312 is prevented by the operation of any law or rule of law, other than this part and other than section 7122 (relating to compromises), then the effect of the error shall be corrected by an adjustment made in the amount and in the manner specified in section 1314.

(b)Conditions necessary for adjustment

(1)Maintenance of an inconsistent position

Except in cases described in paragraphs (3) (B) and (4) of section 1312, an adjustment shall be made under this part only if—

(A)in case the amount of the adjustment would be credited or refunded in the same manner as an overpayment under section 1314, there is adopted in the determination a position maintained by the Secretary, or

(B)in case the amount of the adjustment would be assessed and collected in the same manner as a deficiency under section 1314, there is adopted in the determination a position maintained by the taxpayer with respect to whom the determination is made,

and the position maintained by the Secretary in the case described in subparagraph (A) or maintained by the taxpayer in the case described in subparagraph (B) is inconsistent with the erroneous inclusion, exclusion, omission, allowance, disallowance, recognition, or nonrecognition, as the case may be.

(2)Correction not barred at time of erroneous action

(A)Determination described in section 1312(3)(B)

In the case of a determination described in section 1312(3)(B) (relating to certain exclusions from income), adjustment shall be made under this part only if assessment of a deficiency for the taxable year in which the item is includible or against the related taxpayer was not barred, by any law or rule of law, at the time the Secretary first maintained, in a notice of deficiency sent pursuant to section 6212 or before the Tax Court, that the item described in section 1312(3)(B) should be included in the gross income of the taxpayer for the taxable year to which the determination relates.

(B)Determination described in section 1312(4)

In the case of a determination described in section 1312(4) (relating to disallowance of certain deductions and credits), adjustment shall be made under this part only if credit or refund of the overpayment attributable to the deduction or credit described in such section which should have been allowed to the taxpayer or related taxpayer was not barred, by any law or rule of law, at the time the taxpayer first maintained before the Secretary or before the Tax Court, in writing, that he was entitled to such deduction or credit for the taxable year to which the determination relates.

(3)Existence of relationship

In case the amount of the adjustment would be assessed and collected in the same manner as a deficiency (except for cases described in section 1312(3)(B)), the adjustment shall not be made with respect to a related taxpayer unless he stands in such relationship to the taxpayer at the time the latter first maintains the inconsistent position in a return, claim for refund, or petition (or amended petition) to the Tax Court for the taxable year with respect to which the determination is made, or if such position is not so maintained, then at the time of the determination.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1976—Subsec. (b)(2). Pub. L. 94–455, §§ 1901(a)(142), 1906(b)(13)(A), struck out “or his delegate” after “Secretary” and “of the United States” after “Tax Court” wherever appearing. Subsec. (b)(3). Pub. L. 94–455, § 1901(a)(142), struck out “of the United States” after “Tax Court”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1976 AmendmentAmendment by section 1901(a)(142) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

§1311 Correction of Error