26 U.S.C. § 1314 — Amount and method of adjustment

Page 2427 TITLE 26—INTERNAL REVENUE CODE § 1314 (1) a decision by the Tax Court or a judg- ment, 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 dis- posed 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 offset- ting 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 re- duction 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 Sec- retary, an agreement for purposes of this part, signed by the Secretary and by any person, re- lating 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 tax- payer with respect to whom a determination is made, stood, in the taxable year with respect to which the erroneous inclusion, exclusion, omis- sion, 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 corpora- tions (as defined in section 1504). (Aug. 16, 1954, ch. 736, 68A Stat. 339; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) Editorial Notes AMENDMENTS 1976—Subsec. (a)(3), (4). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wherever appearing. § 1314. Amount and method of adjustment (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 pro- vided in section 6211(b)(1), (3), and (4), relat- ing to the definition of deficiency), if a re- turn was made by the taxpayer and an amount was shown as the tax by the tax- payer thereon, plus (B) the amounts previously assessed (or collected without assessment) as a defi- ciency, over— (2) the amount of rebates, as defined in sec- tion 6211(b)(2), made. There shall then be ascertained the increase or decrease in tax previously determined which re- sults 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 op- erating loss deduction (as defined in section 172) or by a capital loss carryback or carryover (as defined in section 1212), determined with ref- erence to the taxable year with respect to which the error was made. The amount so ascertained (together with any amounts wrongfully col- lected 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 tax- able year. (b) Method of adjustment The adjustment authorized in section 1311(a) shall be made by assessing and collecting, or re- funding or crediting, the amount thereof in the same manner as if it were a deficiency deter- mined by the Secretary with respect to the tax- payer as to whom the error was made or an over- payment claimed by such taxpayer, as the case may be, for the taxable year or years with re- spect to which an amount is ascertained under subsection (a), and as if on the date of the deter- mination one year remained before the expira- tion of the periods of limitation upon assess- ment 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 over- payment, and subsequently such determination is altered or revoked, the amount of the adjust- ment ascertained under subsection (a) of this section shall be redetermined on the basis of such alteration or revocation and any overpay- ment or deficiency resulting from such redeter- mination shall be refunded or credited, or as- sessed and collected, as the case may be, as an adjustment under this part. In the case of an ad- justment resulting from an increase or decrease in a net operating loss or net capital loss which is carried back to the year of adjustment, inter- est 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 overpay- ment, under this part, shall not be diminished Page 2428 TITLE 26—INTERNAL REVENUE CODE [§ 1315 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) 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). (Aug. 16, 1954, ch. 736, 68A Stat. 340; Pub. L. 85–866, title I, § 59(b), Sept. 2, 1958, 72 Stat. 1647; Pub. L. 89–44, title VIII, § 809(d)(5)(B), June 21, 1965, 79 Stat. 168; Pub. L. 91–172, title V, § 512(f)(7), (8), Dec. 30, 1969, 83 Stat. 641, 642; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 113–295, div. A, title II, § 221(a)(87), Dec. 19, 2014, 128 Stat. 4050.) Editorial Notes AMENDMENTS 2014—Subsecs. (d), (e). Pub. L. 113–295 redesignated subsec. (e) as (d) and struck out former subsec. (d). Prior to amendment, text of subsec. (d) read as follows: ‘‘No adjustment shall be made under this part in re- spect of any taxable year beginning prior to January 1, 1932.’’ 1976—Subsec. (b). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. 1969—Subsec. (a). Pub. L. 91–172, § 512(f)(7), substituted ‘‘capital loss carryback or carryover’’ for ‘‘capital loss carryover’’. Subsec. (b). Pub. L. 91–172, § 512(f)(8), inserted ref- erence 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 ad- justment resulting from a determination under section 1313(a)(4), the’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91–172 applicable with respect to net capital losses sustained in taxable years begin- ning 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. [§ 1315. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(143), Oct. 4, 1976, 90 Stat. 1788] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 341, re- lated to effective date of this part. Statutory Notes and Related Subsidiaries 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. [PART III—REPEALED] [§ 1321. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(144), Oct. 4, 1976, 90 Stat. 1788] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 342, re- lated to involuntary liquidation of LIFO inventories. Statutory Notes and Related Subsidiaries 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. [PART IV—REPEALED] [§§ 1331 to 1337. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(145)(A), Oct. 4, 1976, 90 Stat. 1788] 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 recov- eries. 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 sec- tion 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. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Pub. L. 94–455, title XIX, § 1901(a)(145)(B), Oct. 4, 1976, 90 Stat. 1788, provided that: ‘‘The repeal by subpara- graph (A) [repealing sections 1331 to 1337 of this title] shall apply with respect to war loss recoveries in tax- able years beginning after December 31, 1976’’. PART V—CLAIM OF RIGHT Sec. 1341. Computation of tax where taxpayer restores substantial amount held under claim of right. [1342. Repealed.] Editorial Notes AMENDMENTS 1976—Pub. L. 94–455, title XIX, § 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’’. § 1341. Computation of tax where taxpayer re- stores substantial amount held under claim of right (a) General rule If—