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TITLE 26-INTERNAL REVENUE CODE (3) Existence of relationship In case the amount of the adjustment would be assessed and collected in the same manner as a deficiency (except for cases de- scribed In section 1312(3)(B)), the adjustment shall not be made with respect to a related taxpayer unless he stands in such relation- ship to the taxpayer at the time the latter first maintains the inconsistent position in a return, claim for refund, or petition (or amended petition) to the Tax Court for the taxable year with respect to which the deter- mination is made, or if such position is not so maintained, then at the time of the determi- nation. (Aug. 16, 1954, ch. 736, 68A Stat. 337; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(142), 1906(b)(13)(A), 90 Stat. 1788, 1834.) AMENDMENTS 1976--Subsec. (b)(2). Pub. L. 94-455, §§ 1901(a)(142), 1906(b)(13)(A), struck out "or his delegate" following "Secretary" and "of the United States" following "Tax Court" wherever appearing. Subsec. (b)(3). Pub. L. 94-455, § 1901(a)(142), struck out "of the United States" following "Tax Court". En, rTvE DATE OF 1976 AMEND MuT Amendment of subsecs. (b)(2)(A), (B), (3) by section 1901(a)(142) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. CROSS REFERENCES Mitigation of effect of renegotiation of government contracts, see section 1481 of this title. SECTION RxERIUn TO IN OTuEm SECTIONS This section is referred to in sections 1312, 1314, 1481 of this title. § 1312. Circumstances of adjustment The circumstances under which the adjust- ment provided in section 1311 is authorized are as follows: (1) Double inclusion of an item of gross income The determination requires the inclusion in gross income of an item which was erroneous- ly Included in the gross Income of the taxpay- er for another taxable year or In the gross income of a related taxpayer. (2) Double allowance of a deduction or credit The determination allows a deduction or credit which was erroneously allowed to the taxpayer for another taxable year or to a re- lated taxpayer. (3) Double exclusion of an Item of gross income (A) Items included in income The determination requires the exclusion from gross income of an item Included in a return filed by the taxpayer or with respect to which tax was paid and which was erro- neously excluded or omitted from the gross income of the taxpayer for another taxable year, or from the gross income of a related taxpayer; or (B) Items not included in income The determination requires the exclusion from gross income of an item not included in a return filed by the taxpayer and with respect to which the tax was not paid but which is includible in the gross income of the taxpayer for another taxable year or in the gross income of a related taxpayer. (4) Double disallowance of a deduction or credit The determination disallows a deduction or credit which should have been allowed to, but was not allowed to, the taxpayer for another taxable year, or to a related taxpayer. (5) Correlative deductions and inclusions for trusts or estates and legatees, beneficiaries, or heirs The determination allows or disallows any of the additional deductions allowable in com- puting the taxable income of estates or trusts, or requires or denies any of the inclusions in the computation of taxable income of benefi- ciaries, heirs, or legatees, specified In subparts A to E, inclusive (secs. 641 and following, re- lating to estates, trusts, and beneficiaries) of part I of subchapter J of this chapter, or cor- responding provisions of prior internal rev- enue laws, and the correlative inclusion or de- duction, as the case may be, has been errone- ously excluded, omitted, or included, or disal- lowed, omitted, or allowed, as the case may be, in respect of the related taxpayer. (6) Correlative deductions and credits for certain related corporations The determination allows or disallows a de- duction (including a credit) in computing the taxable Income (or, as the case may be, net income, normal tax net income, or surtax net income) of a corporation, and a correlative de- duction or credit has been erroneously al- lowed, omitted, or disallowed, as the case may be, in respect of a related taxpayer described in section 1313(c)(7). (7) Basis of property after erroneous treatment of a prior transaction (A) General rule The determination determines the basis of property, and in respect of any transac- tion on which such basis depends, or in re- spect of any transaction which was errone- ously treated as affecting such basis, there occurred, with respect to a taxpayer de- scribed in subparagraph (B) of this para- graph, any of the errors described in sub- paragraph (C) of this paragraph. (B) Taxpayers with respect to whom the errone- ous treatment occurred The taxpayei with respect to whom the erroneous treatment occurred must be- (I) the taxpayer with respect to whom the determination is made, (ii) a taxpayer who acquired title to the property in the transaction and from whom, mediately or Immediately, the tax- payer with respect to whom the determi- nation is made derived title, or (iii) c taxpayer who had title to the property at the time of the transaction and from whom, mediately or immediate- ly, the taxpayer with respect to whom the determination is made derived title, if the basis of the property in the hands of the taxpayer with respect to whom the deter- mination is made is determined under sec- tion 1015(a) (relating to the oasis of prop- erty acquired by gift). Page 723 § 1312