
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC6234]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
                         CHAPTER 63--ASSESSMENT
 
            Subchapter C--Tax Treatment of Partnership Items
 
Sec. 6234. Declaratory judgment relating to treatment of items 
        other than partnership items with respect to an oversheltered 
        return
        

(a) General rule

    If--
        (1) a taxpayer files an oversheltered return for a taxable year,
        (2) the Secretary makes a determination with respect to the 
    treatment of items (other than partnership items) of such taxpayer 
    for such taxable year, and
        (3) the adjustments resulting from such determination do not 
    give rise to a deficiency (as defined in section 6211) but would 
    give rise to a deficiency if there were no net loss from partnership 
    items,

the Secretary is authorized to send a notice of adjustment reflecting 
such determination to the taxpayer by certified or registered mail.

(b) Oversheltered return

    For purposes of this section, the term ``oversheltered return'' 
means an income tax return which--
        (1) shows no taxable income for the taxable year, and
        (2) shows a net loss from partnership items.

(c) Judicial review in the Tax Court

    Within 90 days, or 150 days if the notice is addressed to a person 
outside the United States, after the day on which the notice of 
adjustment authorized in subsection (a) is mailed to the taxpayer, the 
taxpayer may file a petition with the Tax Court for redetermination of 
the adjustments. Upon the filing of such a petition, the Tax Court shall 
have jurisdiction to make a declaration with respect to all items (other 
than partnership items and affected items which require partner level 
determinations as described in section 6230(a)(2)(A)(i)) for the taxable 
year to which the notice of adjustment relates, in accordance with the 
principles of section 6214(a). Any such declaration shall have the force 
and effect of a decision of the Tax Court and shall be reviewable as 
such.

(d) Failure to file petition

                           (1) In general

        Except as provided in paragraph (2), if the taxpayer does not 
    file a petition with the Tax Court within the time prescribed in 
    subsection (c), the determination of the Secretary set forth in the 
    notice of adjustment that was mailed to the taxpayer shall be deemed 
    to be correct.

                            (2) Exception

        Paragraph (1) shall not apply after the date that the taxpayer--
            (A) files a petition with the Tax Court within the time 
        prescribed in subsection (c) with respect to a subsequent notice 
        of adjustment relating to the same taxable year, or
            (B) files a claim for refund of an overpayment of tax under 
        section 6511 for the taxable year involved.

    If a claim for refund is filed by the taxpayer, then solely for 
    purposes of determining (for the taxable year involved) the amount 
    of any computational adjustment in connection with a partnership 
    proceeding under this subchapter (other than under this section) or 
    the amount of any deficiency attributable to affected items in a 
    proceeding under section 6230(a)(2), the items that are the subject 
    of the notice of adjustment shall be presumed to have been correctly 
    reported on the taxpayer's return during the pendency of the refund 
    claim (and, if within the time prescribed by section 6532 the 
    taxpayer commences a civil action for refund under section 7422, 
    until the decision in the refund action becomes final).

(e) Limitations period

                           (1) In general

        Any notice to a taxpayer under subsection (a) shall be mailed 
    before the expiration of the period prescribed by section 6501 
    (relating to the period of limitations on assessment).

      (2) Suspension when Secretary mails notice of adjustment

        If the Secretary mails a notice of adjustment to the taxpayer 
    for a taxable year, the period of limitations on the making of 
    assessments shall be suspended for the period during which the 
    Secretary is prohibited from making the assessment (and, in any 
    event, if a proceeding in respect of the notice of adjustment is 
    placed on the docket of the Tax Court, until the decision of the Tax 
    Court becomes final), and for 60 days thereafter.

                   (3) Restrictions on assessment

        Except as otherwise provided in section 6851, 6852, or 6861, no 
    assessment of a deficiency with respect to any tax imposed by 
    subtitle A attributable to any item (other than a partnership item 
    or any item affected by a partnership item) shall be made--
            (A) until the expiration of the applicable 90-day or 150-day 
        period set forth in subsection (c) for filing a petition with 
        the Tax Court, or
            (B) if a petition has been filed with the Tax Court, until 
        the decision of the Tax Court has become final.

(f) Further notices of adjustment restricted

    If the Secretary mails a notice of adjustment to the taxpayer for a 
taxable year and the taxpayer files a petition with the Tax Court within 
the time prescribed in subsection (c), the Secretary may not mail 
another such notice to the taxpayer with respect to the same taxable 
year in the absence of a showing of fraud, malfeasance, or 
misrepresentation of a material fact.

(g) Coordination with other proceedings under this subchapter

                           (1) In general

        The treatment of any item that has been determined pursuant to 
    subsection (c) or (d) shall be taken into account in determining the 
    amount of any computational adjustment that is made in connection 
    with a partnership proceeding under this subchapter (other than 
    under this section), or the amount of any deficiency attributable to 
    affected items in a proceeding under section 6230(a)(2), for the 
    taxable year involved. Notwithstanding any other law or rule of law 
    pertaining to the period of limitations on the making of 
    assessments, for purposes of the preceding sentence, any adjustment 
    made in accordance with this section shall be taken into account 
    regardless of whether any assessment has been made with respect to 
    such adjustment.

        (2) Special rule in case of computational adjustment

        In the case of a computational adjustment that is made in 
    connection with a partnership proceeding under this subchapter 
    (other than under this section), the provisions of paragraph (1) 
    shall apply only if the computational adjustment is made within the 
    period prescribed by section 6229 for assessing any tax under 
    subtitle A which is attributable to any partnership item or affected 
    item for the taxable year involved.

               (3) Conversion to deficiency proceeding

        If--
            (A) after the notice referred to in subsection (a) is mailed 
        to a taxpayer for a taxable year but before the expiration of 
        the period for filing a petition with the Tax Court under 
        subsection (c) (or, if a petition is filed with the Tax Court, 
        before the Tax Court makes a declaration for that taxable year), 
        the treatment of any partnership item for the taxable year is 
        finally determined, or any such item ceases to be a partnership 
        item pursuant to section 6231(b), and
            (B) as a result of that final determination or cessation, a 
        deficiency can be determined with respect to the items that are 
        the subject of the notice of adjustment,

    the notice of adjustment shall be treated as a notice of deficiency 
    under section 6212 and any petition filed in respect of the notice 
    shall be treated as an action brought under section 6213.

                       (4) Finally determined

        For purposes of this subsection, the treatment of partnership 
    items shall be treated as finally determined if--
            (A) the Secretary enters into a settlement agreement (within 
        the meaning of section 6224) with the taxpayer regarding such 
        items,
            (B) a notice of final partnership administrative adjustment 
        has been issued and--
                (i) no petition has been filed under section 6226 and 
            the time for doing so has expired, or
                (ii) a petition has been filed under section 6226 and 
            the decision of the court has become final, or

            (C) the period within which any tax attributable to such 
        items may be assessed against the taxpayer has expired.

(h) Special rules if Secretary incorrectly determines applicable 
        procedure

     (1) Special rule if Secretary erroneously mails notice of 
                                 adjustment

        If the Secretary erroneously determines that subchapter B does 
    not apply to a taxable year of a taxpayer and consistent with that 
    determination timely mails a notice of adjustment to the taxpayer 
    pursuant to subsection (a) of this section, the notice of adjustment 
    shall be treated as a notice of deficiency under section 6212 and 
    any petition that is filed in respect of the notice shall be treated 
    as an action brought under section 6213.

     (2) Special rule if Secretary erroneously mails notice of 
                                 deficiency

        If the Secretary erroneously determines that subchapter B 
    applies to a taxable year of a taxpayer and consistent with that 
    determination timely mails a notice of deficiency to the taxpayer 
    pursuant to section 6212, the notice of deficiency shall be treated 
    as a notice of adjustment under subsection (a) and any petition that 
    is filed in respect of the notice shall be treated as an action 
    brought under subsection (c).

(Added Pub. L. 105-34, title XII, Sec. 1231(a), Aug. 5, 1997, 111 Stat. 
1020.)


                             Effective Date

    Section applicable to partnership taxable years ending after Aug. 5, 
1997, see section 1231(d) of Pub. L. 105-34, set out as an Effective 
Date of 1997 Amendment note under section 6211 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 6501, 7459, 7482 of this 
title.
