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income that, respondent contends, Beaton and Steiner received on
the occasion of the conversion of their VeloBind Junior Common
Stock--Series A into VeloBind common stock. When our
determination that this conversion occurred in 1985, and not
1984, became final (the determination that respondent contends is
described in section 1312), 1985 was closed by the statute of
limitations.
Section 1314(b) directs respondent to precede “in the same
manner as if it [the claimed adjustment] were a deficiency
determined by the Secretary with respect to the taxpayer as to
whom the error was made”--e.g., by notices of deficiency to
petitioners. Section 1314(b) then provides its own statute of
limitations--i.e., “as if on the date of the determination one
year remained before the expiration of the periods of limitation
upon assessment * * * for such taxable year”.
This statutory structure envisions a two-step procedure: A
determination, followed by the issuance of a notice of deficiency
within 1 year after the determination. See Benenson v. United
States, 385 F.2d 26, 31 (2d Cir. 1967).
Section 1.1314(b)-1(b), Income Tax Regs., provides in
pertinent part, as follows:
(b) For the purpose of the adjustments authorized by
section 1311, the period of limitations upon the making of
an assessment or upon refund or credit, as the case may be,
for the taxable year of an adjustment shall be considered as
if, on the date of the determination, one year remained
before the expiration of such period. The Commissioner thus
has one year from the date of the determination within which
to mail a notice of deficiency in respect of the amount of
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