-CITE-
26 USC Subchapter Q - Readjustment of Tax Between Years
and Special Limitations 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
-HEAD-
SUBCHAPTER Q - READJUSTMENT OF TAX BETWEEN YEARS AND SPECIAL
LIMITATIONS
-MISC1-
Part
I. Income averaging.
II. Mitigation of effect of limitations and other
provisions.
[III, IV. Repealed.]
V. Claim of right.
[VI. Repealed.]
VII. Recoveries of foreign expropriation losses.
AMENDMENTS
1997 - Pub. L. 105-34, title IX, Sec. 933(b), Aug. 5, 1997, 111
Stat. 882, added item for part I.
1986 - Pub. L. 99-514, title I, Sec. 141(c), Oct. 22, 1986, 100
Stat. 2117, struck out item for part I "Income averaging".
1981 - Pub. L. 97-34, title I, Sec. 101(c)(2)(C), Aug. 13, 1981,
95 Stat. 183, struck out item for part VI "Maximum rate on personal
service income".
1976 - Pub. L. 94-455, title XIX, Secs. 1901(b)(36)(E), (37)(F),
1951(c)(3)(D), Oct. 4, 1976, 90 Stat. 1802, 1803, 1841, struck out
items for parts III and IV "Involuntary liquidation and replacement
of LIFO inventories" and "War loss recoveries", respectively, and
substituted in item for part VI "Maximum rate on personal service
income" for "Other limitations".
1966 - Pub. L. 89-384, Sec. 1(g)(1), Apr. 8, 1966, 80 Stat. 104,
added item for part VII.
1964 - Pub. L. 88-272, title II, Sec. 232(f)(3), Feb. 26, 1964,
78 Stat. 112, substituted "averaging" for "attributable to several
taxable years" in item for part I.
-End-
-CITE-
26 USC PART I - INCOME AVERAGING 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART I - INCOME AVERAGING
-HEAD-
PART I - INCOME AVERAGING
-MISC1-
Sec.
1301. Averaging of farm income.
PRIOR PROVISIONS
A prior part I consisted of sections 1301 to 1305, prior to
repeal by Pub. L. 99-514, title I, Sec. 141(a), Oct. 22, 1986, 100
Stat. 2117.
-End-
-CITE-
26 USC Sec. 1301 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART I - INCOME AVERAGING
-HEAD-
Sec. 1301. Averaging of farm income
-STATUTE-
(a) In general
At the election of an individual engaged in a farming business,
the tax imposed by section 1 for such taxable year shall be equal
to the sum of -
(1) a tax computed under such section on taxable income reduced
by elected farm income, plus
(2) the increase in tax imposed by section 1 which would result
if taxable income for each of the 3 prior taxable years were
increased by an amount equal to one-third of the elected farm
income.
Any adjustment under this section for any taxable year shall be
taken into account in applying this section for any subsequent
taxable year.
(b) Definitions
In this section -
(1) Elected farm income
(A) In general
The term "elected farm income" means so much of the taxable
income for the taxable year -
(i) which is attributable to any farming business; and
(ii) which is specified in the election under subsection
(a).
(B) Treatment of gains
For purposes of subparagraph (A), gain from the sale or other
disposition of property (other than land) regularly used by the
taxpayer in such a farming business for a substantial period
shall be treated as attributable to such a farming business.
(2) Individual
The term "individual" shall not include any estate or trust.
(3) Farming business
The term "farming business" has the meaning given such term by
section 263A(e)(4).
(c) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this section, including
regulations regarding -
(1) the order and manner in which items of income, gain,
deduction, or loss, or limitations on tax, shall be taken into
account in computing the tax imposed by this chapter on the
income of any taxpayer to whom this section applies for any
taxable year, and
(2) the treatment of any short taxable year.
-SOURCE-
(Added Pub. L. 105-34, title IX, Sec. 933(a), Aug. 5, 1997, 111
Stat. 881.)
-MISC1-
PRIOR PROVISIONS
A prior section 1301, added Pub. L. 88-272, title II, Sec.
232(a), Feb. 26, 1964, 78 Stat. 106; amended Pub. L. 91-172, title
III, Sec. 311(a), Dec. 30, 1969, 83 Stat. 586; Pub. L. 98-369, div.
A, title I, Sec. 173(b), (c)(1), July 18, 1984, 98 Stat. 704,
placed a limit on the tax attributable to averagable income, prior
to repeal by Pub. L. 99-514, title I, Secs. 141(a), 151(a), Oct.
22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.
Another prior section 1301, act Aug. 16, 1954, ch. 736, 68A Stat.
334, related to compensation from an employment, defined "an
employment", and stated the rule with respect to partners, prior to
the general revision of this part by Pub. L. 88-272.
A prior section 1302, added Pub. L. 88-272, title II, Sec.
232(a), Feb. 26, 1964, 78 Stat. 106; amended Pub. L. 91-172, title
III, Sec. 311(b), Dec. 30, 1969, 83 Stat. 586; Pub. L. 94-455,
title VII, Sec. 701(f)(1), Oct. 4, 1976, 90 Stat. 1580; Pub. L.
95-30, title I, Sec. 102(b)(15), May 23, 1977, 91 Stat. 138; Pub.
L. 95-600, title I, Sec. 101(d)(2), Nov. 6, 1978, 92 Stat. 2770;
Pub. L. 95-615, Sec. 202(g)(5), formerly Sec. 202(f)(5), Nov. 8,
1978, 92 Stat. 3100, renumbered Pub. L. 96-222, title I, Sec.
108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223; Pub. L. 97-34, title I,
Sec. 111(b)(3), Aug. 13, 1981, 95 Stat. 194; Pub. L. 97-248, title
II, Sec. 265(b)(2)(B), Sept. 3, 1982, 96 Stat. 547; Pub. L. 98-369,
div. A, title I, Sec. 173(a), (c)(2)-(4), July 18, 1984, 98 Stat.
703, 704, defined "averagable income" and other terms related to
income averaging, prior to repeal by Pub. L. 99-514, title I, Secs.
141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec.
31, 1986.
Another prior section 1302, act Aug. 16, 1964, ch. 736, 68A Stat.
335, related to income from an invention or artistic work, prior to
the general revision of this part by Pub. L. 88-272.
A prior section 1303, added Pub. L. 88-272, title II, Sec.
232(a), Feb. 26, 1964, 78 Stat. 107; amended Pub. L. 91-172, title
III, Sec. 311(d)(1), Dec. 30, 1969, 83 Stat. 587; Pub. L. 94-455,
title XIX, Sec. 1901(b)(8)(G), Oct. 4, 1976, 90 Stat. 1795; Pub. L.
97-34, title I, Sec. 111(b)(4), Aug. 13, 1981, 95 Stat. 194; Pub.
L. 99-272, title XIII, Sec. 13206(a), (b), Apr. 7, 1986, 100 Stat.
318, 319, related to individuals eligible for income averaging,
prior to repeal by Pub. L. 99-514, title I, Secs. 141(a), 151(a),
Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.
Another prior section 1303, acts Aug. 16, 1954, ch. 736, 68A
Stat. 335, Sept. 22, 1961, Pub. L. 87-293, title II, Sec. 201(b),
75 Stat. 625, related to income from back pay, prior to the general
revision of this part by Pub. L. 88-272.
A prior section 1304, added Pub. L. 88-272, title II, Sec.
232(a), Feb. 26, 1964, 78 Stat. 108; amended Pub. L. 91-172, title
III, Sec. 311(c), (d)(2), title V, Sec. 515(c)(4), title VIII,
Secs. 802(c)(5), 803(d)(8), Dec. 30, 1969, 83 Stat. 587, 646, 678,
684; Pub. L. 93-406, title II, Sec. 2005(c)(6), Sept. 2, 1974, 88
Stat. 991; Pub. L. 94-455, title III, Sec. 302(c), title V, Sec.
501(b)(7), title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1555, 1559, 1834; Pub. L. 95-600, title IV, Sec. 401(b)(5), Nov. 6,
1978, 92 Stat. 2867; Pub. L. 95-615, Sec. 202(g)(5), formerly Sec.
202(f)(5), Nov. 8, 1978, 92 Stat. 3100, renumbered Pub. L. 96-222,
title I, Sec. 108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223; Pub. L.
97-34, title I, Secs. 101(c)(2)(B), 111(b)(3), (4), Aug. 13, 1981,
95 Stat. 183, 194; Pub. L. 97-248, title II, Sec. 265(b)(2)(C),
Sept. 3, 1982, 96 Stat. 547, set out special rules for income
averaging, prior to repeal by Pub. L. 99-514, title I, Secs.
141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec.
31, 1986.
Another prior section 1304, act Aug. 11, 1955, ch. 804, Sec.
1(a), 69 Stat. 688, related to compensatory damages for patent
infringement, prior to the general revision of this part by Pub. L.
88-272.
A prior section 1305, added Pub. L. 88-272, title II, Sec.
232(a), Feb. 26, 1964, 78 Stat. 110; amended Pub. L. 94-455, title
XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, provided for
promulgation of regulations for income averaging, prior to repeal
by Pub. L. 99-514, title I, Secs. 141(a), 151(a), Oct. 22, 1986,
100 Stat. 2117, 2121, effective Dec. 31, 1986.
Another prior section 1305, act Aug. 26, 1957, Pub. L. 85-165,
Sec. 1, 71 Stat. 413, related to damages for breach of contract or
fiduciary duty, prior to the general revision of this part by Pub.
L. 88-272.
A prior section 1306, Pub. L. 85-866, title I, Sec. 58(a), Sept.
2, 1958, 72 Stat. 1646, related to damages received for injuries
under the antitrust laws, prior to the general revision of this
part by Pub. L. 88-272.
A prior section 1307, act Aug. 16, 1954, ch. 736, 68A Stat. 336,
Sec. 1307, formerly Sec. 1304; renumbered Sec. 1305, Aug. 11, 1955,
ch. 804, Sec. 1(a), 69 Stat. 688; renumbered Sec. 1306, Aug. 26,
1957, Pub. L. 85-165, Sec. 1, 71 Stat. 413; renumbered Sec. 1307,
Sept. 2, 1958, Pub. L. 85-866, title I, Sec. 58(a), 72 Stat. 1646;
amended Oct. 16, 1962, Pub. L. 87-834, Sec. 22(a), 76 Stat. 1064,
provided rules applicable to this part, prior to the general
revision of this part by Pub. L. 88-272.
EFFECTIVE DATE
Section 933(c) of Pub. L. 105-34, as amended by Pub. L. 105-277,
div. J, title II, Sec. 2011, Oct. 21, 1998, 112 Stat. 2681-902,
provided that: "The amendments made by this section [enacting this
section] shall apply to taxable years beginning after December 31,
1997."
-End-
-CITE-
26 USC PART II - MITIGATION OF EFFECT OF LIMITATIONS AND
OTHER PROVISIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-MISC1-
Sec.
1311. Correction of error.
1312. Circumstances of adjustment.
1313. Definitions.
1314. Amount and method of adjustment.
[1315. Repealed.]
AMENDMENTS
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(35), Oct. 4, 1976,
90 Stat. 1802, struck out item 1315 "Effective date".
-End-
-CITE-
26 USC Sec. 1311 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
Sec. 1311. Correction of error
-STATUTE-
(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 non-recognition, 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.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 337; Pub. L. 94-455, title XIX,
Secs. 1901(a)(142), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1788,
1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (b)(2). Pub. L. 94-455, Secs. 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, Sec. 1901(a)(142), struck out "of
the United States" after "Tax Court".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment 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.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1312, 1314 of this title.
-End-
-CITE-
26 USC Sec. 1312 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
Sec. 1312. Circumstances of adjustment
-STATUTE-
The circumstances under which the adjustment provided in section
1311 is authorized are as follows:
(1) Double inclusion of an item of gross income
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.
(2) Double allowance of a deduction or credit
The determination allows a deduction or credit which was
erroneously allowed to the taxpayer for another taxable year or
to a related taxpayer.
(3) Double exclusion of an item of gross income
(A) Items included in income
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
(B) Items not included in income
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.
(4) Double disallowance of a deduction or credit
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.
(5) Correlative deductions and inclusions for trusts or estates
and legatees, beneficiaries, or heirs
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.
(6) Correlative deductions and credits for certain related
corporations
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).
(7) Basis of property after erroneous treatment of a prior
transaction
(A) General rule
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.
(B) Taxpayers with respect to whom the erroneous treatment
occurred
The taxpayer with respect to whom the erroneous treatment
occurred must be -
(i) the taxpayer with respect to whom the determination is
made,
(ii) 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
(iii) 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).
(C) Prior erroneous treatment
With respect to a taxpayer described in subparagraph (B) of
this paragraph -
(i) there was an erroneous inclusion in, or omission from,
gross income,
(ii) there was an erroneous recognition, or nonrecognition,
of gain or loss, or
(iii) 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.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 338; Pub. L. 85-866, title I,
Sec. 59(a), Sept. 2, 1958, 72 Stat. 1647.)
-MISC1-
AMENDMENTS
1958 - Pars. (6), (7). Pub. L. 85-866 added par. (6) and
redesignated former par. (6) as (7).
EFFECTIVE DATE OF 1958 AMENDMENT
Section 59(c) of Pub. L. 85-866 provided that: "The amendments
made by subsections (a) and (b) [amending this section and section
1314 of this title] shall apply to determinations (as defined in
section 1313(a)) made after November 14, 1954."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1311 of this title.
-End-
-CITE-
26 USC Sec. 1313 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
Sec. 1313. Definitions
-STATUTE-
(a) Determination
For purposes of this part, the term "determination" means -
(1) a decision by the Tax Court or a judgment, decree, or other
order by any court of competent jurisdiction, which has become
final;
(2) a closing agreement made under section 7121;
(3) a final disposition by the Secretary of a claim for refund.
For purposes of this part, a claim for refund shall be deemed
finally disposed of by the Secretary -
(A) as to items with respect to which the claim was allowed,
on the date of allowance of refund or credit or on the date of
mailing notice of disallowance (by reason of offsetting items)
of the claim for refund, and
(B) as to items with respect to which the claim was
disallowed, in whole or in part, or as to items applied by the
Secretary in reduction of the refund or credit, on expiration
of the time for instituting suit with respect thereto (unless
suit is instituted before the expiration of such time); or
(4) under regulations prescribed by the Secretary, an agreement
for purposes of this part, signed by the Secretary and by any
person, relating to the liability of such person (or the person
for whom he acts) in respect of a tax under this subtitle for any
taxable period.
(b) Taxpayer
Notwithstanding section 7701(a)(14), the term "taxpayer" means
any person subject to a tax under the applicable revenue law.
(c) Related taxpayer
For purposes of this part, the term "related taxpayer" means a
taxpayer who, with the taxpayer with respect to whom a
determination is made, stood, in the taxable year with respect to
which the erroneous inclusion, exclusion, omission, allowance, or
disallowance was made, in one of the following relationships:
(1) husband and wife,
(2) grantor and fiduciary,
(3) grantor and beneficiary,
(4) fiduciary and beneficiary, legatee, or heir,
(5) decedent and decedent's estate,
(6) partner, or
(7) member of an affiliated group of corporations (as defined
in section 1504).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 339; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (a)(3), (4). Pub. L. 94-455 struck out "or his
delegate" after "Secretary" wherever appearing.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1311, 1312, 1314, 1377 of
this title.
-End-
-CITE-
26 USC Sec. 1314 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
Sec. 1314. Amount and method of adjustment
-STATUTE-
(a) Ascertainment of amount of adjustment
In computing the amount of an adjustment under this part there
shall first be ascertained the tax previously determined for the
taxable year with respect to which the error was made. The amount
of the tax previously determined shall be the excess of -
(1) the sum of -
(A) the amount shown as the tax by the taxpayer on his return
(determined as provided in section 6211(b)(1), (3), and (4),
relating to the definition of deficiency), if a return was made
by the taxpayer and an amount was shown as the tax by the
taxpayer thereon, plus
(B) the amounts previously assessed (or collected without
assessment) as a deficiency, over -
(2) the amount of rebates, as defined in section 6211(b)(2),
made.
There shall then be ascertained the increase or decrease in tax
previously determined which results solely from the correct
treatment of the item which was the subject of the error (with due
regard given to the effect of the item in the computation of gross
income, taxable income, and other matters under this subtitle). A
similar computation shall be made for any other taxable year
affected, or treated as affected, by a net operating loss deduction
(as defined in section 172) or by a capital loss carryback or
carryover (as defined in section 1212), determined with reference
to the taxable year with respect to which the error was made. The
amount so ascertained (together with any amounts wrongfully
collected as additions to the tax or interest, as a result of such
error) for each taxable year shall be the amount of the adjustment
for that taxable year.
(b) Method of adjustment
The adjustment authorized in section 1311(a) shall be made by
assessing and collecting, or refunding or crediting, the amount
thereof in the same manner as if it were a deficiency determined by
the Secretary with respect to the taxpayer as to whom the error was
made or an overpayment claimed by such taxpayer, as the case may
be, for the taxable year or years with respect to which an amount
is ascertained under subsection (a), and as if on the date of the
determination one year remained before the expiration of the
periods of limitation upon assessment or filing claim for refund
for such taxable year or years. If, as a result of a determination
described in section 1313(a)(4), an adjustment has been made by the
assessment and collection of a deficiency or the refund or credit
of an overpayment, and subsequently such determination is altered
or revoked, the amount of the adjustment ascertained under
subsection (a) of this section shall be redetermined on the basis
of such alteration or revocation and any overpayment or deficiency
resulting from such redetermination shall be refunded or credited,
or assessed and collected, as the case may be, as an adjustment
under this part. In the case of an adjustment resulting from an
increase or decrease in a net operating loss or net capital loss
which is carried back to the year of adjustment, interest shall not
be collected or paid for any period prior to the close of the
taxable year in which the net operating loss or net capital loss
arises.
(c) Adjustment unaffected by other items
The amount to be assessed and collected in the same manner as a
deficiency, or to be refunded or credited in the same manner as an
overpayment, under this part, shall not be diminished by any credit
or set-off based upon any item other than the one which was the
subject of the adjustment. The amount of the adjustment under this
part, if paid, shall not be recovered by a claim or suit for refund
or suit for erroneous refund based upon any item other than the one
which was the subject of the adjustment.
(d) Periods for which adjustments may be made
No adjustment shall be made under this part in respect of any
taxable year beginning prior to January 1, 1932.
(e) Taxes imposed by subtitle C
This part shall not apply to any tax imposed by subtitle C (sec.
3101 and following relating to employment taxes).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 340; Pub. L. 85-866, title I,
Sec. 59(b), Sept. 2, 1958, 72 Stat. 1647; Pub. L. 89-44, title
VIII, Sec. 809(d)(5)(B), June 21, 1965, 79 Stat. 168; Pub. L.
91-172, title V, Sec. 512(f)(7), (8), Dec. 30, 1969, 83 Stat. 641,
642; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976,
90 Stat. 1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (b). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
1969 - Subsec. (a). Pub. L. 91-172, Sec. 512(f)(7), substituted
"capital loss carryback or carryover" for "capital loss carryover".
Subsec. (b). Pub. L. 91-172, Sec. 512(f)(8), inserted reference
to net capital loss.
1965 - Subsec. (a)(1)(A). Pub. L. 89-44 struck out "(b)(1) and
(3)" and inserted in lieu thereof "(b)(1), (3), and (4)".
1958 - Subsec. (c). Pub. L. 85-866 substituted in second sentence
"The" for "Other than in the case of an adjustment resulting from a
determination under section 1313(a)(4), the".
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to net
capital losses sustained in taxable years beginning after Dec. 31,
1969, see section 512(g) of Pub. L. 91-172, set out as a note under
section 1212 of this title.
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by Pub. L. 89-44 applicable to taxable years beginning
on or after July 1, 1965, see section 809(f) of Pub. L. 89-44, set
out as a note under section 6420 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 effective with respect to
determinations made after Nov. 14, 1954, see section 59(c) of Pub.
L. 85-866, set out as a note under section 1312 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 481, 1311, 1333, 1351,
6164, 6411 of this title.
-End-
-CITE-
26 USC Sec. 1315 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART II - MITIGATION OF EFFECT OF LIMITATIONS AND OTHER PROVISIONS
-HEAD-
[Sec. 1315. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(143),
Oct. 4, 1976, 90 Stat. 1788]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 341, related to
effective date of this part.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
-CITE-
26 USC [PART III - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART III - REPEALED]
-HEAD-
[PART III - REPEALED]
-End-
-CITE-
26 USC Sec. 1321 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART III - REPEALED]
-HEAD-
[Sec. 1321. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(144),
Oct. 4, 1976, 90 Stat. 1788]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 342, related to
involuntary liquidation of LIFO inventories.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
-CITE-
26 USC [PART IV - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART IV - REPEALED]
-HEAD-
[PART IV - REPEALED]
-End-
-CITE-
26 USC Secs. 1331 to 1337 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART IV - REPEALED]
-HEAD-
[Secs. 1331 to 1337. Repealed. Pub. L. 94-455, title XIX, Sec.
1901(a)(145)(A), Oct. 4, 1976, 90 Stat. 1788]
-MISC1-
Section 1331, act Aug. 16, 1954, ch. 736, 68A Stat. 343, related
to war loss recoveries.
Section 1332, act Aug. 16, 1954, ch. 736, 68A Stat. 343, related
to inclusion in gross income of war loss recoveries.
Section 1333, act Aug. 16, 1954, ch. 736, 68A Stat. 344, related
to tax adjustment measured by prior benefits.
Section 1334, act Aug. 16, 1954, ch. 736, 68A Stat. 346, related
to restoration of value of investments referable to destroyed or
seized property.
Section 1335, act Aug. 16, 1954, ch. 736, 68A Stat. 346, related
to election by taxpayer for application of section 1333.
Section 1336, act Aug. 16, 1954, ch. 736, 68A Stat. 347, related
to basis of recovered property.
Section 1337, act Aug. 16, 1954, ch. 736, 68A Stat. 347, related
to applicable rules.
EFFECTIVE DATE OF REPEAL
Section 1901(a)(145)(B) provided that: "The repeal by
subparagraph (A) [repealing sections 1331 to 1337 of this title]
shall apply with respect to war loss recoveries in taxable years
beginning after December 31, 1976".
-End-
-CITE-
26 USC PART V - CLAIM OF RIGHT 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART V - CLAIM OF RIGHT
-HEAD-
PART V - CLAIM OF RIGHT
-MISC1-
Sec.
1341. Computation of tax where taxpayer restores substantial
amount held under claim of right.
[1342. Repealed.]
AMENDMENTS
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(38), Oct. 4, 1976,
90 Stat. 1803, struck out item 1342 "Computation of tax where
taxpayer recovers substantial amount held by another under claim of
right".
-End-
-CITE-
26 USC Sec. 1341 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART V - CLAIM OF RIGHT
-HEAD-
Sec. 1341. Computation of tax where taxpayer restores substantial
amount held under claim of right
-STATUTE-
(a) General rule
If -
(1) an item was included in gross income for a prior taxable
year (or years) because it appeared that the taxpayer had an
unrestricted right to such item;
(2) a deduction is allowable for the taxable year because it
was established after the close of such prior taxable year (or
years) that the taxpayer did not have an unrestricted right to
such item or to a portion of such item; and
(3) the amount of such deduction exceeds $3,000,
then the tax imposed by this chapter for the taxable year shall be
the lesser of the following:
(4) the tax for the taxable year computed with such deduction;
or
(5) an amount equal to -
(A) the tax for the taxable year computed without such
deduction, minus
(B) the decrease in tax under this chapter (or the
corresponding provisions of prior revenue laws) for the prior
taxable year (or years) which would result solely from the
exclusion of such item (or portion thereof) from gross income
for such prior taxable year (or years).
For purposes of paragraph (5)(B), the corresponding provisions of
the Internal Revenue Code of 1939 shall be chapter 1 of such code
(other than subchapter E, relating to self-employment income) and
subchapter E of chapter 2 of such code.
(b) Special rules
(1) If the decrease in tax ascertained under subsection (a)(5)(B)
exceeds the tax imposed by this chapter for the taxable year
(computed without the deduction) such excess shall be considered to
be a payment of tax on the last day prescribed by law for the
payment of tax for the taxable year, and shall be refunded or
credited in the same manner as if it were an overpayment for such
taxable year.
(2) Subsection (a) does not apply to any deduction allowable with
respect to an item which was included in gross income by reason of
the sale or other disposition of stock in trade of the taxpayer (or
other property of a kind which would properly have been included in
the inventory of the taxpayer if on hand at the close of the prior
taxable year) or property held by the taxpayer primarily for sale
to customers in the ordinary course of his trade or business. This
paragraph shall not apply if the deduction arises out of refunds or
repayments with respect to rates made by a regulated public utility
(as defined in section 7701(a)(33) without regard to the limitation
contained in the last two sentences thereof) if such refunds or
repayments are required to be made by the Government, political
subdivision, agency, or instrumentality referred to in such
section, or by an order of a court, or are made in settlement of
litigation or under threat or imminence of litigation.
(3) If the tax imposed by this chapter for the taxable year is
the amount determined under subsection (a)(5), then the deduction
referred to in subsection (a)(2) shall not be taken into account
for any purpose of this subtitle other than this section.
(4) For purposes of determining whether paragraph (4) or
paragraph (5) of subsection (a) applies -
(A) in any case where the deduction referred to in paragraph
(4) of subsection (a) results in a net operating loss, such loss
shall, for purposes of computing the tax for the taxable year
under such paragraph (4), be carried back to the same extent and
in the same manner as is provided under section 172; and
(B) in any case where the exclusion referred to in paragraph
(5)(B) of subsection (a) results in a net operating loss or
capital loss for the prior taxable year (or years), such loss
shall, for purposes of computing the decrease in tax for the
prior taxable year (or years) under such paragraph (5) (B), be
carried back and carried over to the same extent and in the same
manner as is provided under section 172 or section 1212, except
that no carryover beyond the taxable year shall be taken into
account.
(5) For purposes of this chapter, the net operating loss
described in paragraph (4)(A) of this subsection, or the net
operating loss or capital loss described in paragraph (4)(B) of
this subsection, as the case may be, shall (after the application
of paragraph (4) or (5)(B) of subsection (a) for the taxable year)
be taken into account under section 172 or 1212 for taxable years
after the taxable year to the same extent and in the same manner as
-
(A) a net operating loss sustained for the taxable year, if
paragraph (4) of subsection (a) applied, or
(B) a net operating loss or capital loss sustained for the
prior taxable year (or years), if paragraph (5)(B) of subsection
(a) applied.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 348; Pub. L. 85-866, title I,
Sec. 60(a)-(d), Sept. 2, 1958, 72 Stat. 1647; Pub. L. 87-863, Sec.
5(a), Oct. 23, 1962, 76 Stat. 1142; Pub. L. 88-272, title II, Sec.
234(b)(7), Feb. 26, 1964, 78 Stat. 116; Pub. L. 94-455, title XIX,
Sec. 1901(a)(146), Oct. 4, 1976, 90 Stat. 1788.)
-REFTEXT-
REFERENCES IN TEXT
Chapter 1 of the Internal Revenue Code of 1939, referred to in
subsec. (a), was comprised of sections 1 to 482 of former Title 26,
Internal Revenue Code. Chapter 1 was repealed by section
7851(a)(1)(A) of this title. For table of comparisons of the 1939
Code to the 1986 Code, see Table I preceding section 1 of this
title. See also section 7851(e) of this title for provision that
references in the 1986 Code to a provision of the 1939 Code, not
then applicable, shall be deemed a reference to the corresponding
provision of the 1986 Code, which is then applicable.
Subchapter E of chapter 2 of the Internal Revenue Code of 1939,
referred to in subsec. (a), was comprised of sections 710 to 784 of
former Title 26, Internal Revenue Code. Sections 710 to 736, 740,
742 to 744, 750, 751, 760, 761, and 780 to 784 were repealed by act
Nov. 8, 1945, ch. 453, title I, Sec. 122(a), 59 Stat. 568. Section
741 was repealed by act Oct. 21, 1942, ch. 619, title II, Secs.
224(b), 228(b), 56 Stat. 920, 925. Section 752 was repealed by act
Oct. 21, 1942, ch. 619, title II, Sec. 229(a)(1), 56 Stat. 931,
eff. as of Oct. 8, 1940.
-MISC1-
AMENDMENTS
1976 - Subsec. (b)(2). Pub. L. 94-455 struck out provision
relating to the applicability of this paragraph where deduction
arises out of payments or repayments made pursuant to a price
redetermination provision in a subcontract entered into before Jan.
1, 1958.
1964 - Subsec. (b)(2). Pub. L. 88-272 substituted "7701(a)(33)
without regard to the limitation continued in the last two
sentences thereof)" for "1503(c) without regard to paragraph (2)
thereof)".
1962 - Subsec. (b)(4), (5). Pub. L. 87-863 added pars. (4) and
(5).
1958 - Subsec. (a). Pub. L. 85-866, Sec. 60(a), inserted "and
subchapter E of chapter 2 of such code" in last sentence.
Subsec. (b)(2). Pub. L. 85-866, Sec. 60(b), (c), in second
sentence inserted "with respect to rates" and inserted ", or by an
order of a court, or are made in settlement of litigation or under
threat or imminence of litigation" and inserted last sentence.
Subsec. (b)(3). Pub. L. 85-866, Sec. 60(d), added par. (3).
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to taxable years beginning
after Dec. 31, 1963, see section 234(c) of Pub. L. 88-272, set out
as a note under section 1503 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Section 5(b) of Pub. L. 87-863 provided that: "The amendment made
by subsection (a) [amending this section] shall be effective with
respect to taxable years beginning on or after January 1, 1962."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by section 60(a), (c), (d) of Pub. L. 85-866 applicable
to taxable years beginning after Dec. 31, 1953, and ending after
Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85-866, set out as a
note under section 165 of this title.
Section 60(e) of Pub. L. 85-866 provided that: "The amendment
made by subsection (b) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1957. No
interest shall be allowed or paid on any overpayment resulting from
the application of the amendment made by subsection (c) [amending
this section]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 5, 67, 6213, 6411 of this
title.
-End-
-CITE-
26 USC Sec. 1342 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART V - CLAIM OF RIGHT
-HEAD-
[Sec. 1342. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(147),
Oct. 4, 1976, 90 Stat. 1788]
-MISC1-
Section, added Aug. 12, 1955, ch. 870, Sec. 3, 69 Stat. 717,
related to computation of tax where taxpayer recovers substantial
amount held by another under claim of right.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
-CITE-
26 USC [PART VI - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART VI - REPEALED]
-HEAD-
[PART VI - REPEALED]
-End-
-CITE-
26 USC Sec. 1346 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART VI - REPEALED]
-HEAD-
[Sec. 1346. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(148),
Oct. 4, 1976, 90 Stat. 1788]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 349, related to
recovery of unconstitutional Federal taxes.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
-CITE-
26 USC Sec. 1347 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART VI - REPEALED]
-HEAD-
[Sec. 1347. Repealed. Pub. L. 94-455, title XIX, Sec.
1951(b)(12)(A), Oct. 4, 1976, 90 Stat. 1840]
-MISC1-
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 349; Sept. 2,
1958, Pub. L. 85-866, title I, Sec. 61(a), 72 Stat. 1648; Dec. 30,
1969, Pub. L. 91-172, title VIII, Sec. 803(d)(5), 83 Stat. 684,
related to claims against the United States involving acquisition
of property.
SAVINGS PROVISION
Section 1951(b)(12)(B) of Pub. L. 94-455 provided that:
"Notwithstanding subparagraph (A) [repealing this section], if
amounts received in a taxable year beginning after December 31,
1976, would have been subject to the provisions of section 1347 if
received in a taxable year beginning before such date, the tax
imposed by section 1 attributable to such receipt shall be computed
as if section 1347 had not been repealed."
-End-
-CITE-
26 USC Sec. 1348 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
[PART VI - REPEALED]
-HEAD-
[Sec. 1348. Repealed. Pub. L. 97-34, title I, Sec. 101(c)(1), Aug.
13, 1981, 95 Stat. 183]
-MISC1-
Section, added Pub. L. 91-172, title VIII, Sec. 804(a), Dec. 30,
1969, 83 Stat. 685; amended Pub. L. 93-406, title II, Sec.
2005(c)(14), Sept. 2, 1974, 88 Stat. 992; Pub. L. 94-455, title
III, Sec. 302(a), Oct. 4, 1976, 90 Stat. 1554; Pub. L. 95-600,
title IV, Secs. 441(a), 442(a), title VII, Sec. 701(x)(1), (2),
Nov. 6, 1978, 92 Stat. 2878, 2920; Pub. L. 95-600, title IV, Sec.
441(a), as amended Pub. L. 96-222, title I, Sec. 104(a)(5)(B), Apr.
1, 1980, 94 Stat. 218, provided for a 50-percent maximum rate on
personal service income.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1981,
see section 101(f)(1) of Pub. L. 97-34, set out as an Effective
Date of 1981 Amendment note under section 1 of this title.
TRANSITIONAL RULE IN CASE OF TAXABLE YEAR BEGINNING BEFORE NOV. 1,
1978, AND ENDING AFTER OCT. 31, 1978
Section 441(b)(2) of Pub. L. 95-600, as amended by Pub. L.
96-222, title I, Sec. 104(a)(5)(A), Apr. 1, 1980, 94 Stat. 218,
provided that in the case of a taxable year which began before Nov.
1, 1978, and ended after Oct. 31, 1978, the amount taken into
account under subsec. (b)(2)(B) of section 1348 of this title by
reason of section 57(a)(9) of this title be 50 percent of the
lesser of the net capital gain for the taxable year or the net
capital gain taking into account only gain or loss properly taken
into account for the portion of the taxable year before Nov. 1,
1978.
-End-
-CITE-
26 USC PART VII - RECOVERIES OF FOREIGN EXPROPRIATION
LOSSES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART VII - RECOVERIES OF FOREIGN EXPROPRIATION LOSSES
-HEAD-
PART VII - RECOVERIES OF FOREIGN EXPROPRIATION LOSSES
-MISC1-
Sec.
1351. Treatment of recoveries of foreign expropriation
losses.
-End-
-CITE-
26 USC Sec. 1351 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Q - Readjustment of Tax Between Years and Special
Limitations
PART VII - RECOVERIES OF FOREIGN EXPROPRIATION LOSSES
-HEAD-
Sec. 1351. Treatment of recoveries of foreign expropriation losses
-STATUTE-
(a) Election
(1) In general
This section shall apply only to a recovery, by a domestic
corporation subject to the tax imposed by section 11 or 801, of a
foreign expropriation loss sustained by such corporation and only
if such corporation was subject to the tax imposed by section 11
or 801, as the case may be, for the year of the loss and elects
to have the provisions of this section apply with respect to such
loss.
(2) Time, manner, and scope
An election under paragraph (1) shall be made at such time and
in such manner as the Secretary may prescribe by regulations. An
election made with respect to any foreign expropriation loss
shall apply to all recoveries in respect of such loss.
(b) Definition of foreign expropriation loss
For purposes of this section, the term "foreign expropriation
loss" means any loss sustained by reason of the expropriation,
intervention, seizure, or similar taking of property by the
government of any foreign country, any political subdivision
thereof, or any agency or instrumentality of the foregoing. For
purposes of the preceding sentence, a debt which becomes worthless
shall, to the extent of any deduction allowed under section 166(a),
be treated as a loss.
(c) Amount of recovery
(1) General rule
The amount of any recovery of a foreign expropriation loss is
the amount of money and the fair market value of other property
received in respect of such loss, determined as of the date of
receipt.
(2) Special rule for life insurance companies
The amount of any recovery of a foreign expropriation loss
includes, in the case of a life insurance company, the amount of
decrease of any item taken into account under section 807(c), to
the extent such decrease is attributable to the release, by
reason of such loss, of its liabilities with respect to such
item.
(d) Adjustment for prior tax benefits
(1) In general
That part of the amount of a recovery of a foreign
expropriation loss to which this section applies which, when
added to the aggregate of the amounts of previous recoveries with
respect to such loss, does not exceed the allowable deductions in
prior taxable years on account of such loss shall be excluded
from gross income for the taxable year of the recovery for
purposes of computing the tax under this subtitle; but there
shall be added to, and assessed and collected as a part of, the
tax under this subtitle for such taxable year an amount equal to
the total increase in the tax under this subtitle for all taxable
years which would result by decreasing, in an amount equal to
such part of the recovery so excluded, the deductions allowable
in the prior taxable years on account of such loss. For purposes
of this paragraph, if the loss to which the recovery relates was
taken into account as a loss from the sale or exchange of a
capital asset, the amount of the loss shall be treated as an
allowable deduction even though there were no gains against which
to allow such loss.
(2) Computation
The increase in the tax for each taxable year referred to in
paragraph (1) shall be computed in accordance with regulations
prescribed by the Secretary. Such regulations shall give effect
to previous recoveries of any kind (including recoveries
described in section 111, relating to recovery of tax benefit
items) with respect to any prior taxable year, but shall
otherwise treat the tax previously determined for any taxable
year in accordance with the principles set forth in section
1314(a) (relating to correction of errors). Subject to the
provisions of paragraph (3), all credits allowable against the
tax for any taxable year, and all carryovers and carrybacks
affected by so decreasing the allowable deductions, shall be
taken into account in computing the increase in the tax.
(3) Foreign taxes
For purposes of this subsection, any choice made under subpart
A of part III of subchapter N (relating to foreign tax credit)
for any taxable year may be changed.
(4) Substitution of current tax rate
For purposes of this subsection, the rates of tax specified in
section 11(b) for the taxable year of the recovery shall be
treated as having been in effect for all prior taxable years.
(e) Gain on recovery
That part of the amount of a recovery of a foreign expropriation
loss to which this section applies which is not excluded from gross
income under subsection (d)(1) shall be considered for the taxable
year of the recovery as gain on the involuntary conversion of
property as a result of its destruction or seizure and shall be
recognized or not recognized as provided in section 1033.
(f) Basis of recovered property
The basis of property (other than money) received as a recovery
of a foreign expropriation loss to which this section applies shall
be an amount equal to its fair market value on the date of receipt,
reduced by such part of the gain under subsection (e) which is not
recognized as provided in section 1033.
(g) Restoration of value of investments
For purposes of this section, if the value of any interest in, or
with respect to, property (including any interest represented by a
security, as defined in section 165(g)(2)) -
(1) which became worthless by reason of the expropriation,
intervention, seizure, or similar taking of such property by the
government of any foreign country, any political subdivision
thereof, or any agency or instrumentality of the foregoing, and
(2) which was taken into account as a loss from the sale or
exchange of a capital asset or with respect to which a deduction
for a loss was allowed under section 165 or a deduction for a bad
debt was allowed under section 166,
is restored in whole or in part by reason of any recovery of money
or other property in respect of the property which became
worthless, the value so restored shall be treated as property
received as a recovery in respect of such loss or such bad debt.
(h) Special rule for evidences of indebtedness
Bonds or other evidences of indebtedness received as a recovery
of a foreign expropriation loss to which this section applies shall
not be considered to have any original issue discount within the
meaning of section 1273(a).
(i) Adjustments for succeeding years
For purposes of this subtitle, proper adjustment shall be made,
under regulations prescribed by the Secretary, in -
(1) the credit under section 27 (relating to foreign tax
credit),
(2) the credit under section 38 (relating to general business
credit),
(3) the net operating loss deduction under section 172, or the
operations loss deduction under section 810,
(4) the capital loss carryover under section 1212(a), and
(5) such other items as may be specified by such regulations,
for the taxable year of a recovery of a foreign expropriation loss
to which this section applies, and for succeeding taxable years, to
take into account items changed in making the computations under
subsection (d) for taxable years prior to the taxable year of such
recovery.
-SOURCE-
(Added Pub. L. 89-384, Sec. 1(a), Apr. 8, 1966, 80 Stat. 99;
amended Pub. L. 94-455, title X, Sec. 1031(b)(3), title XIX, Sec.
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1623, 1834; Pub. L. 95-600,
title III, Sec. 301(b)(17), Nov. 6, 1978, 92 Stat. 2823; Pub. L.
98-369, div. A, title I, Sec. 42(a)(12), title II, Sec. 211(b)(18),
title IV, Sec. 474(r)(25), July 18, 1984, 98 Stat. 557, 756, 844;
Pub. L. 99-514, title XVIII, Sec. 1812(a)(4), Oct. 22, 1986, 100
Stat. 2833.)
-MISC1-
AMENDMENTS
1986 - Subsec. (d)(2). Pub. L. 99-514 substituted "relating to
recovery of tax benefit items" for "relating to recovery of bad
debts, etc.".
1984 - Subsec. (a)(1). Pub. L. 98-369, Sec. 211(b)(18)(A),
substituted "801" for "802" in two places.
Subsec. (c)(2). Pub. L. 98-369, Sec. 211(b)(18)(B), substituted
"section 807(c)" for "section 810(c)".
Subsec. (h). Pub. L. 98-369, Sec. 42(a)(12), substituted "section
1273(a)" for "section 1232(a)(2)".
Subsec. (i)(1). Pub. L. 98-369, Sec. 474(r)(25)(A), substituted
"section 27" for "section 33".
Subsec. (i)(2). Pub. L. 98-369, Sec. 474(r)(25)(B), substituted
"section 38 (relating to general business credit)" for "section 38
(relating to investment credit)".
Subsec. (i)(3). Pub. L. 98-369, Sec. 211(b)(18)(C), substituted
"section 810" for "section 812".
1978 - Subsec. (d)(4). Pub. L. 95-600 substituted "the rates of
tax specified in section 11(b)" for "the normal tax rate provided
by section 11(b) and the surtax rate provided by section 11(c)
which are in effect".
1976 - Subsecs. (a)(2), (d)(2). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (d)(3). Pub. L. 94-455, Sec. 1031(b)(3), struck out
provisions relating to an election to have limitation provided by
section 904(a)(2) apply and to revocation of such an election
previously made.
Subsec. (i). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or
his delegate" after "Secretary".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 42(a)(12) of Pub. L. 98-369 applicable to
taxable years ending after July 18, 1984, see section 44 of Pub. L.
98-369, set out as an Effective Date note under section 1271 of
this title.
Amendment by section 211(b)(18) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
Amendment by section 474(r)(25) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 applicable to taxable years beginning
after Dec. 31, 1978, see section 301(c) of Pub. L. 95-600, set out
as a note under section 11 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1031(b)(3) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1975, with exceptions for
certain mining operations, and for income from possessions, see
section 1031(c) of Pub. L. 94-455, set out as a note under section
904 of this title.
EFFECTIVE DATE
Section 2 of Pub. L. 89-384, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments
made by section 1 (except subsection (b)) [enacting this section
and section 6167 of this title and amending sections 46, 901, 6503,
and 6601 of this title] shall apply with respect to amounts
received after December 31, 1964, in respect of foreign
expropriation losses (as defined in section 1351(b) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] added by section 1(a))
sustained after December 31, 1958."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 26, 30A, 80, 936, 6167 of
this title.
-End-
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