26 U.S.C. § 6226

Alternative to payment of imputed underpayment by partnership

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(a) In generalIf the partnership—(1) not later than 45 days after the date of the notice of final partnership adjustment, elects the application of this section with respect to an imputed underpayment, and(2) at such time and in such manner as the Secretary may provide, furnishes to each partner of the partnership for the reviewed year and to the Secretary a statement of the partner’s share of any adjustment to a partnership-related item (as determined in the notice of final partnership adjustment),section 6225 shall not apply with respect to such underpayment (and no assessment of tax, levy, or proceeding in any court for the collection of such underpayment shall be made against such partnership) and each such partner shall take such adjustment into account as provided in subsection (b). The election under paragraph (1) shall be made in such manner as the Secretary may provide and, once made, shall be revocable only with the consent of the Secretary.(b) Adjustments taken into account by partner(1) Tax imposed in year of statement

Except as provided in paragraph (4), each partner’s tax imposed by chapter 1 for the taxable year which includes the date the statement was furnished under subsection (a) shall be adjusted by the aggregate of the correction amounts determined under paragraph (2) for the taxable years referred to therein.

(2) Correction amountsThe correction amounts determined under this paragraph are—(A) in the case of the taxable year of the partner which includes the end of the reviewed year, the amount by which the tax imposed under chapter 1 would increase or decrease if the partner’s share of the adjustments described in subsection (a) were taken into account for such taxable year, and(B) in the case of any taxable year after the taxable year referred to in subparagraph (A) and before the taxable year referred to in paragraph (1), the amount by which the tax imposed under chapter 1 would increase or decrease by reason of the adjustment to tax attributes under paragraph (3).(3) Adjustment of tax attributesAny tax attribute which would have been affected if the adjustments described in subsection (a) were taken into account for the taxable year referred to in paragraph (2)(A) shall—(A) in the case of any taxable year referred to in paragraph (2)(B), be appropriately adjusted for purposes of applying such paragraph, and(B) in the case of any subsequent taxable year, be appropriately adjusted.(4) Treatment of partnerships and S corporations in tiered structures(A) In generalIf a partner which receives a statement under subsection (a)(2) is a partnership or an S corporation, such partner shall, with respect to the partner’s share of the adjustment—(i) file with the Secretary a partnership adjustment tracking report which includes such information as the Secretary may require, and(ii)(I) furnish statements under rules similar to the rules of subsection (a)(2), or(II) if no such statements are furnished, compute and pay an imputed underpayment under rules similar to the rules of section 6225 (other than paragraphs (2), (7), and (9) of subsection (c) thereof).(B) Due date

For purposes of subparagraph (A), with respect to a partner’s share of the adjustment, the partnership adjustment tracking report shall be filed, and the imputed underpayment shall be paid or statements shall be furnished, not later than the due date for the return for the adjustment year of the audited partnership.

In the case of a partnership which has elected the application of section 6221(b) with respect to the taxable year of the partnership which includes the end of the reviewed year of the audited partnership, this paragraph shall apply notwithstanding such election.

(D) Audited partnership

For purposes of this paragraph, the term “audited partnership” means, with respect to any partner described in subparagraph (A), the partnership in the chain of ownership originally electing the application of this section.

(E) Treatment of trusts

The Secretary shall prescribe such rules as may be necessary with respect to trusts which receive a statement under subsection (a)(2).

Notwithstanding subsections (a) and (b), any penalties, additions to tax, or additional amount shall be determined as provided under section 6221 and the partners of the partnership for the reviewed year shall be liable for any such penalty, addition to tax, or additional amount.

(2) InterestIn the case of an imputed underpayment with respect to which the application of this section is elected, or which is described in subsection (b)(4)(A)(ii)(I), interest shall be determined—(A) at the partner level,(B) from the due date of the return for the taxable year to which the increase is attributable (determined by taking into account any increases attributable to a change in tax attributes for a taxable year under subsection (b)(2)), and(C) at the underpayment rate under section 6621(a)(2), determined by substituting “5 percentage points” for “3 percentage points” in subparagraph (B) thereof.(d) Judicial review

For the time period within which a partnership may file a petition for a readjustment, see section 6234(a).

(Added Pub. L. 114–74, title XI, § 1101(c)(1), Nov. 2, 2015, 129 Stat. 630; amended Pub. L. 114–113, div. Q, title IV, § 411(b)(1), Dec. 18, 2015, 129 Stat. 3122; Pub. L. 115–141, div. U, title II, §§ 201(c)(4), 204, 206(d), (e), Mar. 23, 2018, 132 Stat. 1173, 1176, 1178.)Editorial NotesPrior Provisions

A prior section 6226, added Pub. L. 97–248, title IV, § 402(a), Sept. 3, 1982, 96 Stat. 653; amended Pub. L. 97–448, title III, § 306(c)(1)(A), Jan. 12, 1983, 96 Stat. 2406; Pub. L. 102–572, title IX, § 902(b)(2), Oct. 29, 1992, 106 Stat. 4516; Pub. L. 105–34, title XII, §§ 1238(b)(1), 1239(b), 1240(a), Aug. 5, 1997, 111 Stat. 1026–1028, related to judicial review of final partnership administrative adjustments, prior to repeal by Pub. L. 114–74, title XI, § 1101(a), Nov. 2, 2015, 129 Stat. 625.

Amendments

2018—Subsec. (a). Pub. L. 115–141, § 206(d), inserted “(and no assessment of tax, levy, or proceeding in any court for the collection of such underpayment shall be made against such partnership)” after “section 6225 shall not apply with respect to such underpayment” in concluding provisions.

Subsec. (a)(2). Pub. L. 115–141, § 201(c)(4), substituted “any adjustment to a partnership-related item” for “any adjustment to income, gain, loss, deduction, or credit”.

Subsec. (b)(1). Pub. L. 115–141, § 206(e)(2), substituted “correction amounts” for “adjustment amounts”.

Pub. L. 115–141, § 206(e)(1), substituted “adjusted” for “increased”.

Pub. L. 115–141, § 204(b)(1), substituted “Except as provided in paragraph (4), each partner’s” for “Each partner’s”.

Subsec. (b)(2). Pub. L. 115–141, § 206(e)(5), substituted “Correction amounts” for “Adjustment amounts” in heading.

Pub. L. 115–141, § 206(e)(3), substituted “increase or decrease” for “increase” in subpars. (A) and (B).

Pub. L. 115–141, § 206(e)(2), substituted “correction amounts” for “adjustment amounts” in introductory provisions.

Subsec. (b)(2)(A). Pub. L. 115–141, § 206(e)(4), substituted “and” for “plus” at end.

Subsec. (b)(4). Pub. L. 115–141, § 204(a), added par. (4).

Subsec. (c)(2). Pub. L. 115–141, § 204(b)(2), inserted “or which is described in subsection (b)(4)(A)(ii)(I),” after “is elected,” in introductory provisions.

2015—Subsec. (d). Pub. L. 114–113 added subsec. (d).

Statutory Notes and Related SubsidiariesEffective Date of 2018 Amendment

Amendment by Pub. L. 115–141 effective as if included in section 1101 of Pub. L. 114–74, see section 207 of Pub. L. 115–141, set out as a note under section 6031 of this title.

Effective Date of 2015 Amendment

Amendment by Pub. L. 114–113 effective as if included in section 1101 of Pub. L. 114–74, see section 411(e) of Pub. L. 114–113, set out as a note under section 6031 of this title.

Effective Date

Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of Pub. L. 114–74, set out as a note under section 6221 of this title.

Notes of Decisions

Cited in 176 cases (9 in the last 5 years), 1985–2026 · leading case: Duffie v. United States, 600 F.3d 362 (5th Cir. 2010).

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Duffie v. United States, 600 F.3d 362 (5th Cir. 2010). · cites it 7× “26 U.S.C. § 6226 (a). If the TMP does not file suit challenging the proposed adjustments within this period, other partners have sixty days to file a petition for read *367 justment.”

Klamath Strategic Inv. Fund, LLC v. United States, 472 F. Supp. 2d 885 (E.D. Tex. 2007). · cites it 7× “It is a civil action by the plaintiffs against the United States under 26 U.S.C. § 6226 for readjustment of partnership items.”

Klamath Strategic Inv. Fund Ex Rel. St. Croix Ventures v. United States, 568 F.3d 537 (5th Cir. 2009). · cites it 4× “The Partnerships filed suit against the Government under 26 U.S.C. § 6226 for readjustment of partnership items.”

Long Term Capital Holdings v. United States, 330 F. Supp. 2d 122 (D. Conn. 2004). · cites it 5× “(“Portfolio”), Long-Term Capital Fund, 1 Eric Rosenfeld, and Richard Leahy filed petitions under 26 U.S.C. § 6226 (a)(2) seeking (a) readjustment of the IRS denial of $106,058,228 in capital losses for petitioners’ 1997 tax year in connection with the sale by Portfolio on…”

Prestop Holdings, LLC v. United States, 96 Fed. Cl. 244 (Fed. Cl. 2010). · cites it 13× “Larson had failed to make the jurisdictional deposit required by 26 U.S.C. § 6226 (e)(1). Respondent argues that the appropriate jurisdictional deposit was the amount that Mr.”

Fid. Int'l Currency Advisor a Fund, LLC v. United States, 747 F. Supp. 2d 49 (D. Mass. 2010). · cites it 6× “Egan pursuant to 26 U.S.C. § 6226 to challenge adjustments made by the Internal Revenue Service to tax returns filed by Fidelity High Tech Advisor A Fund, LLC and Fidelity International Currency Advisor A Fund, LLC for their 2001 and 2002 tax years.”

Prati v. United States, 81 Fed. Cl. 422 (Fed. Cl. 2008). · cites it 5× “26 U.S.C. § 6226 (a). The purpose of a petition is to contest the substantive changes that the IRS has made in the FPAA.”

Petaluma FX Partners, LLC v. Comm'r of Internal Revenue Serv., 591 F.3d 649 (D.C. Cir. 2010). · cites it 3× “at *11-12 (quoting 26 U.S.C. § 6226 (f)). Fourth, the court held that “the gross valuation [misstatement] penalty applies when the adjusted basis of property is reduced to zero because a transaction was disregarded as a sham or lacking economic substance and the taxpayer claims…”

Alpha I, L.P. v. United States, 84 Fed. Cl. 209 (Fed. Cl. 2008). · cites it 16× “Pursuant to 26 U.S.C. § 6226 (e), “Robert Sands deposited the amount by which his taxes would increase as if all of the adjustments in the Group FPAA were correct, including the determination that he was a partner in Group when the Constellation Brands stock was sold.”

Alpha I, L.P. ex rel. Sands v. United States, 86 Fed. Cl. 126 (Fed. Cl. 2009). · cites it 6× “The court relied on language in 26 U.S.C. § 6226 (f) to find that it possessed jurisdiction over whether a non-partnership item is an affected item.”

AWG Leasing Trust v. United States, 592 F. Supp. 2d 953 (N.D. Ohio 2008). · cites it 4× “] KSP, as the Tax Matters Partner of the Trust, took an appeal through this present lawsuit under 26 U.S.C. § 6226 (a)(2). [Joint Stip., Doc.”

Stobie Creek Investments LLC v. United States, 608 F.3d 1366 (Fed. Cir. 2010). · cites it 2× “26 U.S.C. §§ 6226 (f), 6230. The penalties challenged on appeal relate to Stobie Creek’s misstatement of its inside basis in Therma-Tru stock, as well as to adjustments of its basis in that stock pursuant to 26 U.”

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— 26 U.S.C. § 6226(a) — 2 cases

John Irvine v. United States, 729 F.3d 455 (5th Cir. 2013).

Uviado, LLC ex rel. Khan v. United States ex rel. Internal Revenue Serv., 755 F. Supp. 2d 767 (S.D. Tex. 2010).

— 26 U.S.C. § 6226(c) — 1 case

Alpha I, L.P. v. United States, 84 Fed. Cl. 209 (Fed. Cl. 2008). “Pursuant to 26 U.S.C. § 6226 (e), “Robert Sands deposited the amount by which his taxes would increase as if all of the adjustments in the Group FPAA were correct, including the determination that he was a partner in Group when the Constellation Brands stock was sold.”

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