[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1311(a)-1]

[Page 627-628]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1311(a)-1  Introduction.

    (a) Part II (section 1311 and following), subchapter Q, chapter 1 of 
the

[[Page 628]]

Code, provides certain rules for the correction of the effect of an 
erroneous treatment of an item in a taxable year which is closed by the 
statute of limitations or otherwise, in cases where, in connection with 
the ascertainment of the tax for another taxable year, it has been 
determined that there was an erroneous treatment of such item in the 
closed year.
    (b) In most situations falling within this part the correction of 
the effect of the error on a closed year can be made only if either the 
Commissioner or the taxpayer has taken a position in another taxable 
year which is inconsistent with the erroneous treatment of the item in 
the closed year. If a refund or credit would result from the correction 
of the error in the closed year, then the Commissioner must be the one 
maintaining the inconsistent position. For example, if the taxpayer 
erroneously included an item of income on his return for an earlier year 
which is now closed and the Commissioner successfully requires it to be 
included in a later year, then the correction of the effect of the 
erroneous inclusion of that item in the closed year may be made since 
the Commissioner has maintained a position inconsistent with the 
treatment of such item in such closed year. On the other hand, if an 
additional assessment would result from the correction of the error in 
the closed year, then the taxpayer must be the one maintaining the 
inconsistent position. For example, if the taxpayer deducted an item in 
an earlier year which is now closed and he successfully contends that 
the item should be deducted in a later year, then the correction of the 
effect of the erroneous deduction of that item in the closed year may be 
made since the taxpayer has taken a position inconsistent with the 
treatment of such item in such earlier year.
    (c) There are two special circumstances which fall within this part 
but which do not require that an inconsistent position be maintained. 
One of these circumstances relates to the inclusion of an item of income 
in the correct year and the other relates to the allowance of a 
deduction in the correct year. In the first situation, if the 
Commissioner takes the position by a deficiency notice or before the Tax 
Court that an item of income should be included in the gross income of a 
taxpayer for a particular year and it is ultimately determined that such 
item was not so includible, then such item can be included in the income 
of the proper year if that year was not closed at the time the 
Commissioner took his position. In the second situation, if the taxpayer 
claims that a deduction should be allowed for a particular year and it 
is ultimately determined that the deduction was not allowable in that 
year, then the taxpayer may take the deduction in the proper year if 
that year was not closed at the time the taxpayer first claimed a 
deduction.

[T.D. 6500, 25 FR 12031, Nov. 26, 1960]