[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6221-1]

[Page 162]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
                               Assessment
 
Sec. 301.6221-1  Tax treatment determined at partnership level.

    (a) In general. A partner's treatment of partnership items on the 
partner's return may not be changed except as provided in sections 6222 
through 6231 and the regulations thereunder. Thus, for example, if a 
partner treats an item on the partner's return consistently with the 
treatment of the item on the partnership return, the IRS generally 
cannot adjust the treatment of that item on the partner's return except 
through a partnership-level proceeding. Similarly, the taxpayer may not 
put partnership items in issue in a proceeding relating to 
nonpartnership items. For example, the taxpayer may not offset a 
potential increase in taxable income based on changes to nonpartnership 
items by a potential decrease based on partnership items.
    (b) Restrictions inapplicable after items become nonpartnership 
items. Section 6221 and paragraph (a) of this section cease to apply to 
items arising from a partnership with respect to a partner when those 
items cease to be partnership items with respect to that partner under 
section 6231(b).
    (c) Penalties determined at partnership level. Any penalty, addition 
to tax, or additional amount that relates to an adjustment to a 
partnership item shall be determined at the partnership level. Partner-
level defenses to such items can only be asserted through refund actions 
following assessment and payment. Assessment of any penalty, addition to 
tax, or additional amount that relates to an adjustment to a partnership 
item shall be made based on partnership-level determinations. 
Partnership-level determinations include all the legal and factual 
determinations that underlie the determination of any penalty, addition 
to tax, or additional amount, other than partner-level defenses 
specified in paragraph (d) of this section.
    (d) Partner-level defenses. Partner-level defenses to any penalty, 
addition to tax, or additional amount that relates to an adjustment to a 
partnership item may not be asserted in the partnership-level 
proceeding, but may be asserted through separate refund actions 
following assessment and payment. See section 6230(c)(4). Partner-level 
defenses are limited to those that are personal to the partner or are 
dependent upon the partner's separate return and cannot be determined at 
the partnership level. Examples of these determinations are whether any 
applicable threshold underpayment of tax has been met with respect to 
the partner or whether the partner has met the criteria of section 
6664(b) (penalties applicable only where return is filed), or section 
6664(c)(1) (reasonable cause exception) subject to partnership-level 
determinations as to the applicability of section 6664(c)(2).
    (e) Cross-references. See Sec. Sec. 301.6231(c)-1 and 301.6231(c)-2 
for special rules relating to certain applications and claims for refund 
based on losses, deductions, or credits from abusive tax shelter 
partnerships.
    (f) Effective date. This section is applicable to partnership 
taxable years beginning on or after October 4, 2001. For years beginning 
prior to October 4, 2001, see Sec. 301.6221-1T contained in 26 CFR part 
1, revised April 1, 2001.

[T.D. 8965, 66 FR 50544, Oct. 4, 2001]

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