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Section 1.482-1(d)(2), Income Tax Regs., provides:
Whenever the district director makes adjustments
to the income of one member of a group of controlled
taxpayers (such adjustments being referred to in this
paragraph as "primary" adjustments) he shall also make
appropriate correlative adjustments to the income of
any other member of the group involved in the
allocation. The correlative adjustment shall actually
be made if the United States income tax liability of
the other member would be affected for any pending
taxable year. Thus, if the district director makes an
allocation of income, he shall not only increase the
income of one member of the group, but shall decrease
the income of the other member if such adjustment would
have an effect on the United States income tax
liability of the other member for any pending taxable
year. * * *
A "pending taxable year" is "any taxable year with respect to
which the United States income tax return of the other member has
been filed by the time the allocation [the primary adjustment] is
made, and with respect to which a credit or refund is not barred
by the operation of any law or rule of law." Id. For purposes
of paragraph (d) of section 1.482-1, Income Tax Regs., the
regulations state that a primary adjustment:
shall not be considered to have been made (and
therefore a correlative adjustment is not required to
be made) until the first occurring of the following
events with respect to the primary adjustment:
(i) The date of assessment of the tax following
execution by the taxpayer of a Form 870 (Waiver of
Restrictions on Assessment and Collection of Deficiency in
Tax and Acceptance of Overassessment) with respect to such
adjustment,
(ii) Acceptance of a Form 870-AD (Offer of Waiver of
Restriction on Assessment and Collection of Deficiency in
Tax and Acceptance of Overassessment),
(iii) Payment of the deficiency,
(iv) Stipulation in the Tax Court of the United States,
or
(v) Final determination of tax liability by offer-in-
compromise, closing agreement, or court action. * * * [Id.]
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