[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: 26CFR301.6222(b)-2]

[Page 164-165]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
                               Assessment
 
Sec. 301.6222(b)-2  Effect of notification of inconsistent treatment.

    (a) In general. Generally, if a partner treats a partnership item on 
the partner's return in a manner inconsistent with the treatment of that 
item on the partnership return, the Internal Revenue Service may make a 
computational adjustment to conform the treatment of the item by the 
partner with the treatment of that item on the

[[Page 165]]

partnership return. Any additional tax resulting from that computational 
adjustment may be assessed without either the commencement of a 
partnership proceeding or notification to the partner that all 
partnership items arising from that partnership will be treated as 
nonpartnership items. However, if a partner notifies the Internal 
Revenue Service of the inconsistent treatment of a partnership item in 
the manner prescribed in Sec. 301.6222(b)-1, the Internal Revenue 
Service generally may not make an adjustment with respect to that 
partnership item unless the Internal Revenue Service--
    (1) Conducts a partnership-level proceeding; or
    (2) Notifies the partner under section 6231(b)(1)(A) that all 
partnership items arising from that partnership will be treated as 
nonpartnership items. See, however, 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.
    (b) Partner protected only to extent of notification. (1) A partner 
who reports the inconsistent treatment of partnership items on the 
partner's return is protected from computational adjustments under 
section 6222(c) only with respect to those partnership items the 
inconsistent treatment of which is reported. Thus, if a partner 
notifying the Internal Revenue Service with respect to one item fails to 
report the inconsistent treatment of another item, the partner is 
subject to a computational adjustment with respect to that other item.
    (2) The following example illustrates the principles of this 
paragraph (b):

    Example. Partner A of Partnership P treats a deduction and a capital 
gain arising from P on A's return in a manner that is inconsistent with 
the treatment of those items by P. A reports the inconsistent treatment 
of the deduction but not of the gain. A is subject to a computational 
adjustment under section 6222(c) with respect to the gain.

    (c) Adjustments in a separate proceeding not limited to conforming 
adjustments. (1) If the Internal Revenue Service conducts a separate 
proceeding with a partner whose partnership items are treated as 
nonpartnership items under section 6231(b), the Internal Revenue Service 
is not limited to making adjustments that merely conform the partner's 
return to the partnership return.
    (2) Example. The following example illustrates the principles of 
this paragraph (c):

    Example. Partnership P allocates to E, one of its partners, a loss 
of $8,000. E, however, claims a loss of $9,000 and reports the 
inconsistent treatment. The Internal Revenue Service notifies E that it 
will treat all of E's partnership items arising from P as nonpartnership 
items. As a result of a separate proceeding with E, the Internal Revenue 
Service may issue a deficiency notice which could include reducing the 
loss to $3,000.

    (d) 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. 301.6222(b)-2T contained in 26 CFR 
part 1, revised April 1, 2001.

[T.D. 8965, 66 FR 50546, Oct. 4, 2001]