Page:United States Statutes at Large Volume 110 Part 3.djvu/51

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PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1781 "(A) a determination as defined in section 1313(a), or". (c) REPEAL OF SPECIAL AUDIT PROVISIONS FOR SUB- CHAPTER S ITEMS.— (1) GENERAL RULE. —Subchapter D of chapter 63 (relating 26 USC 624ict to tax treatment of subchapter S items) is hereby repealed, seg. (2) CONSISTENT TREATMENT REQUIRED.— Section 6037 (relating to return of S corporation) is amended by adding at the end the following new subsection: " (c) SHAREHOLDER'S RETURN MUST BE CONSISTENT WITH COR- PORATE RETURN OR SECRETARY NOTIFIED OF INCONSISTENCY. — "(1) IN GENERAL.— ^A shareholder of an S corporation shall, on such shareholder's return, treat a subchapter S item in a manner which is consistent with the treatment of such item on the corporate return. " (2) NOTIFICATION OF INCONSISTENT TREATMENT. — "(A) IN GENERAL.—In the case of any subchapter S item, if— "(i)(I) the corporation has filed a return but the shareholder's treatment on his return is (or may be) inconsistent with the treatment of the item on the corporate return, or "(II) the corporation has not filed a return, and "(ii) the shareholder files with the Secretary a statement identifying the inconsistency, paragraph (1) shall not apply to such item. " (B) SHAREHOLDER RECEIVING INCORRECT INFORMA- TION.— A shareholder shall be treated as having complied with clause (ii) of subparagraph (A) with respect to a subchapter S item if the shareholder— "(i) demonstrates to the satisfaction of the Secretary that the treatment of the subchapter S item on the shareholder's return is consistent with the treatment of the item on the schedule furnished to the shareholder by the corporation, and "(ii) elects to have this paragraph apply with respect to that item. "(3) EFFECT OF FAILURE TO NOTIFY.— In any case— " (A) described in subparagraph (A)(i)(I) of paragraph (2), and "(B) in which the shareholder does not comply with subparagraph (A)(ii) of paragraph (2), any adjustment required to msdie the treatment of the items by such shareholder consistent with the treatment of the items on the corporate return shall be treated as arising out of mathematical or clerical errors and assessed according to section 6213(b)(1). Paragraph (2) of section 6213(b) shall not apply to any assessment referred to in the preceding sentence. "(4) SUBCHAPTER S ITEM.— For purposes of this subsection, the term 'subchapter S item' means any item of an S corporation to the extent that regulations prescribed by the Secretary provide that, for purposes of this subtitle, such item is more appropriately determined at the corporation level than at the shareholder level.