§1312 — Circumstances of adjustment
53 citing cases
Statute Text — 26 U.S.C. §1312
The circumstances under which the adjustment provided in section 1311 is authorized are as follows:
The determination requires the inclusion in gross income of an item which was erroneously included in the gross income of the taxpayer for another taxable year or in the gross income of a related taxpayer.
The determination allows a deduction or credit which was erroneously allowed to the taxpayer for another taxable year or to a related taxpayer.
The determination requires the exclusion from gross income of an item included in a return filed by the taxpayer or with respect to which tax was paid and which was erroneously excluded or omitted from the gross income of the taxpayer for another taxable year, or from the gross income of a related taxpayer; or
The determination requires the exclusion from gross income of an item not included in a return filed by the taxpayer and with respect to which the tax was not paid but which is includible in the gross income of the taxpayer for another taxable year or in the gross income of a related taxpayer.
The determination disallows a deduction or credit which should have been allowed to, but was not allowed to, the taxpayer for another taxable year, or to a related taxpayer.
The determination allows or disallows any of the additional deductions allowable in computing the taxable income of estates or trusts, or requires or denies any of the inclusions in the computation of taxable income of beneficiaries, heirs, or legatees, specified in subparts A to E, inclusive (secs. 641 and following, relating to estates, trusts, and beneficiaries) of part I of subchapter J of this chapter, or corresponding provisions of prior internal revenue laws, and the correlative inclusion or deduction, as the case may be, has been erroneously excluded, omitted, or included, or disallowed, omitted, or allowed, as the case may be, in respect of the related taxpayer.
The determination allows or disallows a deduction (including a credit) in computing the taxable income (or, as the case may be, net income, normal tax net income, or surtax net income) of a corporation, and a correlative deduction or credit has been erroneously allowed, omitted, or disallowed, as the case may be, in respect of a related taxpayer described in section 1313(c)(7).
The determination determines the basis of property, and in respect of any transaction on which such basis depends, or in respect of any transaction which was erroneously treated as affecting such basis, there occurred, with respect to a taxpayer described in subparagraph (B) of this paragraph, any of the errors described in subparagraph (C) of this paragraph.
The taxpayer with respect to whom the erroneous treatment occurred must be—
the taxpayer with respect to whom the determination is made,
a taxpayer who acquired title to the property in the transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title, or
a taxpayer who had title to the property at the time of the transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title, if the basis of the property in the hands of the taxpayer with respect to whom the determination is made is determined under section 1015(a) (relating to the basis of property acquired by gift).
With respect to a taxpayer described in subparagraph (B) of this paragraph—
there was an erroneous inclusion in, or omission from, gross income,
there was an erroneous recognition, or nonrecognition, of gain or loss, or
there was an erroneous deduction of an item properly chargeable to capital account or an erroneous charge to capital account of an item properly deductible.
Treasury Regulations
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Treas. Reg. §1.1312-1Double inclusion of an item of gross income
(a) Paragraph (1) of section 1312 applies if the determination requires the inclusion in a taxpayer's gross income of an item which was erroneously included in the gross income of the same taxpayer for another taxable year or of a related taxpayer for the same or another taxable year.
(b) The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-1(a)Paragraph (1) of section 1312 applies if the determination requires the inclusion in a taxpayer's gross income of an item which was erroneously included in the gross income of the same taxpayer for another taxable year or of a related taxpayer for the same or another taxable year.
Paragraph (1) of section 1312 applies if the determination requires the inclusion in a taxpayer's gross income of an item which was erroneously included in the gross income of the same taxpayer for another taxable year or of a related taxpayer for the same or another taxable year.
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Treas. Reg. §1.1312-1(b)§1.1312-1(b)
The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-2Double allowance of a deduction or credit
(a) Paragraph (2) of section 1312 applies if the determination allows the taxpayer a deduction or credit which was erroneously allowed the same taxpayer for another taxable year or a related taxpayer for the same or another taxable year.
(b) The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-2(a)Paragraph (2) of section 1312 applies if the determination allows the taxpayer a deduction or credit which was erroneously allowed the same taxpayer for another taxable year or a related taxpayer for the same or another taxable year.
Paragraph (2) of section 1312 applies if the determination allows the taxpayer a deduction or credit which was erroneously allowed the same taxpayer for another taxable year or a related taxpayer for the same or another taxable year.
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Treas. Reg. §1.1312-2(b)§1.1312-2(b)
The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-3Double exclusion of an item of gross income
(a) Items included in income or with respect to which a tax was paid. (1) Paragraph (3)(A) of section 1312 applies if the determination requires the exclusion, from a taxpayer's gross income, of an item included in a return filed by the taxpayer, or with respect to which tax was paid, and which was erroneously excluded or omitted from the gross income of the same taxpayer for another taxable year or of a related taxpayer for the same or another taxable year.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
(b) Items not included in income and with respect to which the tax was not paid. (1) Paragraph (3)(B) of section 1312 applies if the determination requires the exclusion from gross income of an item not included in a return filed by the taxpayer and with respect to which a tax was not paid, but which is includible in the gross income of the same taxpayer for another taxable year, or in the gross income of a related taxpayer for the same or another taxable year. This is one of the two circumstances in which the maintenance of an inconsistent position is not a requirement for an adjustment, but the requirements in paragraph (a) of § 1.1311(b)-2 must be fulfilled (correction not barred at time of erroneous action).
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
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Treas. Reg. §1.1312-3(a)Items included in income or with respect to which a tax was paid.
Items included in income or with respect to which a tax was paid. (1) Paragraph (3)(A) of section 1312 applies if the determination requires the exclusion, from a taxpayer's gross income, of an item included in a return filed by the taxpayer, or with respect to which tax was paid, and which was erroneously excluded or omitted from the gross income of the same taxpayer for another taxable year or of a related taxpayer for the same or another taxable year.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
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Treas. Reg. §1.1312-3(b)Items not included in income and with respect to which the tax was not paid.
Items not included in income and with respect to which the tax was not paid. (1) Paragraph (3)(B) of section 1312 applies if the determination requires the exclusion from gross income of an item not included in a return filed by the taxpayer and with respect to which a tax was not paid, but which is includible in the gross income of the same taxpayer for another taxable year, or in the gross income of a related taxpayer for the same or another taxable year. This is one of the two circumstances in which the maintenance of an inconsistent position is not a requirement for an adjustment, but the requirements in paragraph (a) of § 1.1311(b)-2 must be fulfilled (correction not barred at time of erroneous action).
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
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Treas. Reg. §1.1312-4Double disallowance of a deduction or credit
(a) Paragraph (4) of section 1312 applies if the determination disallows a deduction or credit which should have been, but was not, allowed to the same taxpayer for another taxable year or to a related taxpayer for the same or another taxable year. This is one of the two circumstances in which the maintenance of an inconsistent position is not a requirement for an adjustment but the requirements in paragraph (b) of § 1.1311(b)-2 must be fulfilled (correction not barred at time of erroneous action).
(b) The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-4(a)Paragraph (4) of section 1312 applies if the determination disallows a deduction or credit which should have been, but was not, allowed to the same taxpayer for another taxable year or to a related taxpayer for the same or another taxable year.
Paragraph (4) of section 1312 applies if the determination disallows a deduction or credit which should have been, but was not, allowed to the same taxpayer for another taxable year or to a related taxpayer for the same or another taxable year. This is one of the two circumstances in which the maintenance of an inconsistent position is not a requirement for an adjustment but the requirements in paragraph (b) of § 1.1311(b)-2 must be fulfilled (correction not barred at time of erroneous action).
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Treas. Reg. §1.1312-4(b)§1.1312-4(b)
The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-5Correlative deductions and inclusions for trusts or estates and legatees, beneficiaries, or heirs
(a) Paragraph (5) of section 1312 applies to distributions by a trust or an estate to the beneficiaries, heirs, or legatees. If the determination relates to the amount of the deduction allowed by sections 651 and 661 or the inclusion in taxable income of the beneficiary required by sections 652 and 662 (including amounts falling within subpart D, subchapter J, chapter 1 of the Code, relating to treatment of excess distributions by trusts), or if the determination relates to the additional deduction (or inclusion) specified in section 162 (b) and (c) of the Internal Revenue Code of 1939 (or the corresponding provisions of a prior revenue act), with respect to amounts paid, credited, or required to be distributed to the beneficiaries, heirs, and legatees, and such determination requires:
(1) The allowance to the estate or trust of the deduction when such amounts have been erroneously omitted or excluded from the income of the beneficiaries, heirs, or legatees; or
(2) The inclusion of such amounts in the income of the beneficiaries, heirs, or legatees when the deduction has been erroneously disallowed to or omitted by the estate or trust; or
(3) The disallowance to an estate or trust of the deduction when such amounts have been erroneously included in the income of the beneficiaries, heirs, or legatees; or
(4) The exclusion of such amounts from the income of the beneficiaries, heirs, or legatees when the deduction has been erroneously allowed to the estate or trust.
(b) The application of paragraph (a)(1) of this section may be illustrated by the following example:
(c) The application of paragraph (a)(2) of this section may be illustrated by the following example:
(d) The application of paragraph (a)(3) of this section may be illustrated by the following example:
(e) The application of paragraph (a)(4) of this section may be illustrated by the following example:
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Treas. Reg. §1.1312-5(a)Paragraph (5) of section 1312 applies to distributions by a trust or an estate to the beneficiaries, heirs, or legatees.
Paragraph (5) of section 1312 applies to distributions by a trust or an estate to the beneficiaries, heirs, or legatees. If the determination relates to the amount of the deduction allowed by sections 651 and 661 or the inclusion in taxable income of the beneficiary required by sections 652 and 662 (including amounts falling within subpart D, subchapter J, chapter 1 of the Code, relating to treatment of excess distributions by trusts), or if the determination relates to the additional deduction (or inclusion) specified in section 162 (b) and (c) of the Internal Revenue Code of 1939 (or the corresponding provisions of a prior revenue act), with respect to amounts paid, credited, or required to be distributed to the beneficiaries, heirs, and legatees, and such determination requires:
(1) The allowance to the estate or trust of the deduction when such amounts have been erroneously omitted or excluded from the income of the beneficiaries, heirs, or legatees; or
(2) The inclusion of such amounts in the income of the beneficiaries, heirs, or legatees when the deduction has been erroneously disallowed to or omitted by the estate or trust; or
(3) The disallowance to an estate or trust of the deduction when such amounts have been erroneously included in the income of the beneficiaries, heirs, or legatees; or
(4) The exclusion of such amounts from the income of the beneficiaries, heirs, or legatees when the deduction has been erroneously allowed to the estate or trust.
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Treas. Reg. §1.1312-5(b)§1.1312-5(b)
The application of paragraph (a)(1) of this section may be illustrated by the following example:
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Treas. Reg. §1.1312-5(c)§1.1312-5(c)
The application of paragraph (a)(2) of this section may be illustrated by the following example:
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Treas. Reg. §1.1312-5(d)§1.1312-5(d)
The application of paragraph (a)(3) of this section may be illustrated by the following example:
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Treas. Reg. §1.1312-5(e)§1.1312-5(e)
The application of paragraph (a)(4) of this section may be illustrated by the following example:
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Treas. Reg. §1.1312-6Correlative deductions and credits for certain related corporations
(a) Paragraph (6) of section 1312 applies if the determination allows or disallows a deduction (including a credit) to a corporation, and if a correlative deduction or credit has been erroneously allowed, omitted, or disallowed in respect of a related taxpayer described in section 1313(c)(7).
(b) The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-6(a)Paragraph (6) of section 1312 applies if the determination allows or disallows a deduction (including a credit) to a corporation, and if a correlative deduction or credit has been erroneously allowed, omitted, or disallowed in respect of a related taxpayer described in section 1313(c)(7).
Paragraph (6) of section 1312 applies if the determination allows or disallows a deduction (including a credit) to a corporation, and if a correlative deduction or credit has been erroneously allowed, omitted, or disallowed in respect of a related taxpayer described in section 1313(c)(7).
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Treas. Reg. §1.1312-6(b)§1.1312-6(b)
The application of paragraph (a) of this section may be illustrated by the following examples:
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Treas. Reg. §1.1312-7Basis of property after erroneous treatment of a prior transaction
(a) Paragraph (7) of section 1312 applies if the determination establishes the basis of property, and there occurred one of the following types of errors in respect of a prior transaction upon which such basis depends, or in respect of a prior transaction which was erroneously treated as affecting such basis:
(1) An erroneous inclusion in, or omission from, gross income, or
(2) An erroneous recognition or nonrecognition of gain or loss, or
(3) An erroneous deduction of an item properly chargeable to capital account or an erroneous charge to capital account of an item properly deductible.
(b)(1) For this section to apply, the taxpayer with respect to whom the erroneous treatment occurred must be:
(i) The taxpayer with respect to whom the determination is made; or
(ii) A taxpayer who acquired title to the property in the erroneously treated transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title in such a manner that he will have a basis ascertained by reference to the basis in the hands of the taxpayer who acquired title to the property in the erroneously treated transaction; or
(iii) A taxpayer who had title to the property at the time of the erroneously treated transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title, if the basis of the property in the hands of the taxpayer with respect to whom the determination is made is determined under section 1015(a) (relating to the basis of property acquired by gift) or section 1022 (relating to the basis of property acquired from certain decedents who died in 2010).
(2) No adjustment is authorized with respect to the transferor of the property in a transaction upon which the basis of the property depends, when the determination is with respect to the original transferee or a subsequent transferee of the original transferee.
(c) The application of this section may be illustrated by the following examples:
(d) Effective/applicability date. This section applies on and after January 19, 2017. For rules before January 19, 2017, see § 1.1312-7 as contained in 26 CFR part 1 revised as of April 1, 2016.
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Treas. Reg. §1.1312-7(a)§1.1312-7(a)
Paragraph (7) of section 1312 applies if the determination establishes the basis of property, and there occurred one of the following types of errors in respect of a prior transaction upon which such basis depends, or in respect of a prior transaction which was erroneously treated as affecting such basis:
(1) An erroneous inclusion in, or omission from, gross income, or
(2) An erroneous recognition or nonrecognition of gain or loss, or
(3) An erroneous deduction of an item properly chargeable to capital account or an erroneous charge to capital account of an item properly deductible.
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Treas. Reg. §1.1312-7(b)§1.1312-7(b)
(1) For this section to apply, the taxpayer with respect to whom the erroneous treatment occurred must be:
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Treas. Reg. §1.1312-7(c)§1.1312-7(c)
The application of this section may be illustrated by the following examples:
53 Citing Cases
§ 12:1311 (2007), while section 1312 provides that the articles of organization can require that the LLC be managed by “one or more managers who may, but need not, be members.” La.
To claim the benefits of the mitigation provisions, a taxpayer must show that (1) there was a determination as defined by section 1313(a); (2) the determination falls within specified circumstances of adjustment set forth in section 1312; and (3) the party against whom the mitigation provisions are being invoked has maintained a position inconsistent with the challenged erroneous inclusion, exclusion, recognition, or nonrecognition of income as described by section 1311(b).
The following requirements must be met for reliefunder the mitigation provisions: (1) there must have been a "determination" as defined in section 1313(a); (2) that determination caused one ofthe errors described in section 1312; and (3) on the date ofthat determination, any adjustment to correct the error is - 9 - [*9] barred by operation oflaw (other than a section 7122 compromise or these mitigation provisions).
The following requirements must be met for reliefunder the mitigation provisions: (1) there must have been a "determination" as defined in section 1313(a); (2) that determination caused one ofthe errors described in section 1312; and (3) on the date ofthat determination, any adjustment to correct the error is - 9 - [*9] barred by operation oflaw (other than a section 7122 compromise or these mitigation provisions).
Mitigation Section 1311 provides for the corr etion ofthe effect ofcertain errors under circumstances specified in section 1312 hen one or more provisions oflaw, such as the statute oflimitations, would otherv ise prevent such correction.
Again, we disagree with petitioners.
harge petitioners with the income in dispute, it would appear that responden would be allowed to open up petitioners' 2004 tax years for the appropriate inco e adjustments under the mitigation provisions ofthe Code. See secs. 1311 1314, particularly sec. 1312(3)(B). - 28 - [*281Petitioners contend that the income adjustments regarding the $710,376 should have been charged notjust to them but also to GSN and TerSen, the family limited partnerships that owned four ofthe life insurance policies. Ag
between the two inconsistent positions· is described in section 1312; and (4)4 the other tax years are closed for adjustment -under the applicable -period of -limitations Respondent disagrees Respondent asserts thatspetitioner does not correctly state the conditions for mitigation;- and that even ifrhe did accurately state, the conditions, she failed to demonstrate that he mét all of the required condit
be applied may be described generally as follows: (1) There has been a determination (as defined in section 1313(a)); (2) the determination must fall within one of the specified "circumstances of adjustment" or "doubling-up" situations described in section 1312; (3) with respect to the treatment of the item in question for the determination year, the party against whom the mitigation provisions are invoked must have maintained a position inconsistent with the treatment of the item in another ye
th exceptions not applicable here) if: (1) The Commissioner has made a final determination, as defined in section 1313(a); (2) the determination falls within one of the specified “circumstances of adjustment” or “doubling-up” situations described in section 1312; (3) the party against whom the mitigation provisions are invoked or a related party must have maintained, with respect to the treatment of the item in question for the determination year, a position inconsistent with the treatment of th
the mitigation provisions of sections 1311 through 1314 apply because (1) respondent’s determination to disallow the NOL deduction claimed on the 1995 tax return, and (2) respondent’s refusal to correct the error by allowing the NOL carryback to 1987, constitute a double disallowance of a deduction pursuant to section 1312(4).
limited exceptions not here applicable): 1. A final "determination", as defined in section 1313(a), must have occurred; 2. The determination must fall within one of the specified "circumstances of adjustment" or "doubling-up" situations described in section 1312; 3. The party against whom the mitigation provisions are invoked or a related party must have maintained, with respect to the treatment of the item in question for the determination year, a position inconsistent with the treatment of the
te, respondent lost the opportunity for a comprehensive resolution of the issues in this case in a consolidated proceeding that would have avoided any potential whipsaw. But see the provisions for statutory mitigation, secs. 1311-1314, particularly, sec. 1312(5); see also sec. 1.1312-5(a)(3), Income Tax Regs., and transferee liability, sec. 6901(h). As to petitioner's status as a nontransferee, see John Ownbey Co. v. Commissioner, 645 F.2d 540, 546 (6th Cir. 1981), revg. T.C. Memo. 1978-482; Sto
1311(a); (3) the determination was within one of the categories enumerated in section 1312 as a circumstance of adjustment (e.g., a double allowance of a deduction, sec.
(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 [i.e., secs.
(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 [i.e., secs.
227, 313. At least since 1934, the U.S. Treasury Department has had two forms on which closing agreements may be executed. XIII-1 C.B. 162, 162-163 (1934). Form 866 provides for a final and conclusive agreement between the Commissioner and the taxpayer to the total tax liability of the taxpayer. Form 906 provides for a final and
227, 313. At least since 1934, the U.S. Treasury Department has had two forms on which closing agreements may be executed. XIII-1 C.B. 162, 162-163 (1934). Form 866 provides for a final and conclusive agreement between the Commissioner and the taxpayer to the total tax liability of the taxpayer. Form 906 provides for a final and