[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: 26CFR301.6231(c)-2]

[Page 195-196]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
                               Assessment
 
Sec. 301.6231(c)-2  Special rules for certain refund claims based on losses, 
deductions, or credits from abusive tax shelter partnerships.

    (a) Claims subject to this section. This section applies in the case 
of a claim for credit or refund based on losses, deductions or credits 
of a partnership if the Commissioner, or the Commissioner's delegate, 
determines, after review of available relevant information, that it is 
highly likely that a person described in section 6700(a)(1) made, with 
respect to the partnership--
    (1) A gross valuation overstatement; or
    (2) A false or fraudulent statement with respect to the tax benefits 
to be secured by reason of holding an interest in the partnership that 
would be subject to a penalty under section 6700 (relating to penalty 
for promoting abusive tax shelters, etc.). This section applies only 
with respect to a claim that is based upon the partner's original 
reporting on the partner's income tax return of partnership losses, 
deductions, or credits. Thus, this section does not apply to a request 
for administrative adjustment under section 6227 through which a partner 
seeks to change the partner's reporting of partnership items on the 
partner's income tax return (or on an earlier request for administrative 
adjustment). For purposes of this section, any income tax return 
requesting a credit or refund shall be treated as a claim for a credit 
or refund.
    (b) Determination of special enforcement area. Granting a claim for 
credit or refund described in paragraph (a) of this section may 
encourage the proliferation of abusive tax shelter partnerships and make 
the eventual collection of taxes more difficult. Consequently, the 
Secretary hereby determines that such claims present special enforcement 
considerations within the meaning of section 6231(c)(1)(E).
    (c) Action on refund claims suspended. In the case of a claim 
described in paragraph (a) of this section, the Internal Revenue Service 
may mail to the partner filing the claim a notice stating that no action 
will be taken on the partner's claim until the completion of the 
partnership-level proceedings. The notice shall also inform the partner 
of the partner's limited right to elect to treat items as nonpartnership 
items as provided in paragraph (d) of this section.
    (d) Limited right to elect to treat items as nonpartnership items--
(1) In general. A partner to whom the Internal Revenue Service mails a 
notice of suspension under paragraph (c) of this section may elect in 
accordance with this paragraph (d) to have all partnership items for the 
partnership taxable year in which the losses, deductions, or credits at 
issue arose treated as nonpartnership items.
    (2) Time and place of making election. The election shall be made by 
filing a statement with the Internal Revenue Service office that mailed 
the notice of suspension. The statement may be filed at any time--
    (i) After the date which is one year after the date on which the 
partnership return was filed for the partnership taxable year in which 
the items at issue arose; and
    (ii) Before the date on which the Internal Revenue Service mails to 
the tax matters partner the notice of final partnership administrative 
adjustment for the partnership taxable year in which the items at issue 
arose. For purposes of this paragraph (d)(2), a partnership return filed 
before the last day prescribed by law for its filing (determined without 
regard to extensions) shall be treated as filed on the last day.

[[Page 196]]

    (3) Contents of the statement. The statement shall--
    (i) Be clearly identified as an election to have partnership items 
treated as nonpartnership items because of notification of suspension of 
action on a refund claim;
    (ii) Identify the partnership by name, address, and taxpayer 
identification number;
    (iii) Identify the partner making the election by name, address, and 
taxpayer identification number;
    (iv) Specify the partnership taxable year to which the election 
applies; and
    (v) Be signed by the partner making the election.
    (e) Effective date. This section applies with respect to any claim 
described in paragraph (a) of this section that is filed on or after 
October 4, 2001. For claims filed prior to October 4, 2001, see Sec. 
301.6231(c)-2T contained in 26 CFR part 1, revised April 1, 2001.

[T.D. 8965, 66 FR 50560, Oct. 4, 2001]