Procedure and administration: Taxpayers filing timely income tax returns to whom IRS does not provide timely notice stating additional tax liability; suspension provisions, 34199-34203 [E7-12082]

Agencies

• Internal Revenue Service

[Federal Register: June 21, 2007 (Volume 72, Number 119)]
[Proposed Rules]
[Page 34199-34203]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jn07-8]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-149036-04]
RIN 1545-BG75


Application of Section 6404(g) of the Internal Revenue Code
Suspension Provisions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document proposes regulations for the suspension of
interest, penalties, additions to tax, or additional amounts under
section 6404(g) of the Internal Revenue Code (Code) that explain the
general rules for suspension as well as exceptions to those general
rules. The proposed regulations reflect changes to the law made by the
Internal Revenue Service

[[Page 34200]]

Restructuring and Reform Act of 1998, the American Jobs Creation Act of
2004, the Gulf Opportunity Zone Act of 2005, and the Tax Relief and
Health Care Act of 2006. The proposed regulations affect individual
taxpayers who file timely income tax returns with respect to whom the
IRS does not timely provide a notice specifically stating an additional
tax liability and the basis for that liability. This document also
provides a notice of public hearing on the proposed regulations.

DATES: Written or electronic comments must be received by September 19,
2007. Outlines of topics to be discussed at the public hearing
scheduled for October 11, 2007, at 10 a.m. must be received by
September 20, 2007.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-149036-04), room
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
149036-04), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at https://www.regulations.gov (IRS REG-149036-04).

The public hearing will be held in the Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Stuart Spielman, (202) 622-7950; concerning submissions of comments,
the hearing, or to be placed on the building access list to attend the
hearing, Richard Hurst, (202) 622-7180 (not toll-free numbers) or 
Richard.A.Hurst@irscounsel.treas.gov.


SUPPLEMENTARY INFORMATION:

Background

    This document amends the Procedure and Administration Regulations
(26 CFR part 301) by adding rules relating to the suspension of
interest, penalties, additions to tax, or additional amounts under
section 6404(g). Section 6404(g) was added to the Code by section 3305
of the Internal Revenue Service Restructuring and Reform Act of 1998,
Public Law 105-206 (112 Stat. 685, 743) (RRA 98), effective for taxable
years ending after July 22, 1998. Section 6404(g) was amended by
section 903(c) of the American Jobs Creation Act of 2004, Public Law
108-357 (118 Stat. 1418, 1652) (AJCA), enacted on October 22, 2004; by
section 303 of the Gulf Opportunity Zone Act of 2005, Public Law 109-
135 (119 Stat. 2577, 2608-09) (GOZA), enacted on December 21, 2005; by
section 426(b) of the Tax Relief and Health Care Act of 2006, Public
Law 109-432 (120 Stat. 2922, 2975), enacted on December 20, 2006; and
by section 8242 of the Small Business and Work Opportunity Tax Act of
2007, Public Law 110-28 (121 Stat. 112, 200), enacted on May 25, 2007.
The Treasury Department and the Internal Revenue Service are aware that
questions have been raised regarding the effective date of the changes
made by the Small Business and Work Opportunity Act of 2007 and are
considering further guidance. These regulations are prescribed under
section 7805.

Explanation of Provisions

General Rule

    If an individual taxpayer files a Federal income tax return on or
before the due date for that return (including extensions), and if the
IRS does not timely provide a notice to that taxpayer specifically
stating the taxpayer's liability and the basis for that liability, then
the IRS must suspend any interest, penalty, addition to tax, or
additional amount with respect to any failure relating to the return
that is computed by reference to the period of time the failure
continues and that is properly allocable to the suspension period. A
notice is timely if provided before the close of the eighteen-month
period (thirty-six month period, in the case of notices provided after
November 25, 2007) beginning on the later of the date on which the
return is filed or the due date of the return without regard to
extensions. The suspension period begins on the day after the close of
the eighteen-month period (or thirty-six month period) and ends twenty-
one days after the IRS provides the notice. This suspension rule
applies separately with respect to each item or adjustment.

Amended Returns

    The proposed regulations provide guidance on applying section
6404(g) to amended returns and other signed documents that show an
increased tax liability, as well as to amended returns that show a
decreased tax liability. If, on or after December 21, 2005, a taxpayer
provides to the IRS an amended return or other signed written document
showing an additional tax liability, then the eighteen-month period (or
thirty-six month period) does not begin to run with respect to the
items that gave rise to the additional tax liability until that return
or other signed written document is provided to the IRS. This rule is
mandated by GOZA section 303(b). Except as provided in GOZA section
303(b), the filing of an amended return has no effect on the running of
the eighteen-month period (or thirty-six month period) under section
6404(g). Accordingly, if a taxpayer files an amended return or other
signed written document showing a decrease in tax liability and the IRS
at any time proposes to adjust the changed item or items, any interest,
penalty, addition to tax, or additional amount with respect to the
changed item or items on the amended return or other signed written
document will not be suspended. If married taxpayers file a return
claiming a change in filing status to married filing jointly, the
general rule authorizing suspension will not apply unless each spouse's
separate return, if required to be filed, was timely. An amended return
or other written document is provided to the IRS for purposes of these
proposed regulations when it is received by the IRS.

Notice of Liability and the Basis for Liability

    Notice to the taxpayer must be in writing and specifically state
the amount of the liability and the basis for the liability. The notice
must provide the taxpayer with sufficient information to identify which
items of income, deduction, loss, or credit the IRS has adjusted or
proposes to adjust, and the reason for that adjustment. Administrative
proceedings pertaining to adjustments to partnership items of
partnerships subject to the unified audit and litigation procedures of
Subchapter C of Chapter 63 of Subtitle F of the Internal Revenue Code
(TEFRA) occur at the partnership level. Each partner has the right to
participate in partnership-level administrative proceedings. The tax
matters partner (TMP) of a TEFRA partnership has a fiduciary
relationship to the partners and must provide the partners with
information concerning significant administrative proceedings and
actions within 30 days of the action or the receipt of information
concerning the partnership matter. TEFRA partnership administrative
proceedings at the partnership level concern the treatment of
partnership items and the partners' allocable shares of those items
rather than the specific tax liability of each partner attributable to
the partnership items. Partners can, however, compute the specific tax
attributable to adjustments to partnership items based on their
interests in the partnership, so notice to the TMP concerning the
treatment of partnership items constitutes notice to the partners under
section 6404(g).

[[Page 34201]]

Exceptions to the General Rule for Suspension

    The general rule for suspension does not apply to (1) Any penalty
imposed by section 6651 for failing to file a tax return or for failing
to pay tax; (2) any interest, penalty, addition to tax, or additional
amount in a case involving fraud; (3) any interest, penalty, addition
to tax, or additional amount with respect to any tax liability shown on
a return; (4) any interest, penalty, addition to tax, or additional
amount with respect to any gross misstatement; (5) any interest,
penalty, addition to tax, or additional amount with respect to any
reportable transaction not meeting the disclosure requirement of
section 6664(d)(2)(A) or any listed transaction as defined in section
6707A(c); and (6) any criminal penalty.
    The proposed regulations limit the exception pertaining to a case
involving fraud to the taxpayer and the taxable year in issue. The
proposed regulations also provide that the exception in section 6404(g)
for ``a case involving fraud'' means that fraud on the return with
respect to any item will preclude suspension under section 6404(g) with
respect to all items on the return.
    AJCA section 903(b) added subparagraph (D), pertaining to gross
misstatements, to section 6404(g)(2), effective for taxable years
beginning after December 31, 2003. The proposed regulations define
``gross misstatement'' as the reporting of any item on the original or
any amended return if that item is attributable to a gross valuation
misstatement as defined in section 6662(h), a substantial omission of
income as described in section 6501(e)(1) or section 6229(c), or a
frivolous position or a desire to delay or impede the administration of
the Federal income tax laws as described in section 6702.

Special Rules

    Section 6404(g)(2)(C) provides that interest suspension does not
apply to any tax liability shown on a return. Consistent with this
exception, any interest, penalty, addition to tax, or additional amount
with respect to an erroneous tentative carryback or refund adjustment
will not be suspended because the disallowance of the erroneous
tentative carryback or refund adjustment does not change the tax
liability originally shown on the taxpayer's return. An election under
section 183(e) to defer the determination as to whether the presumption
applies that an activity is engaged in for profit tolls the
notification period and the suspension period described in section
6404(g)(1), in that the election calls for the IRS to defer proposing
adjustments regarding the activity.

Proposed Effective Date

    The regulations, as proposed, apply as of the date of publication
of a Treasury decision adopting these rules as final regulations in the
Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required. It has also
been determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to these regulations, and because
these regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, these
regulations have been submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. The IRS and Treasury Department request comments on the clarity of
the proposed rules and how they can be made easier to understand. All
comments will be made available for public inspection and copying.
    A public hearing has been scheduled for October 11, 2007, beginning
at 10 a.m. in the Auditorium, Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC. Due to building security
procedures, visitors must enter at the Constitution Avenue entrance. In
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. For information about having your name placed on the
building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit written or
electronic comments on September 19, 2007, and an outline of the topics
to be discussed, and the time to be devoted to each topic (signed
original and eight (8) copies) by September 20, 2007. A period of ten
minutes will be allotted to each person for making comments. An agenda
showing the scheduling of the speakers will be prepared after the
deadline for receiving outlines has passed. Copies of the agenda will
be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Stuart Spielman of the
Office of Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read
in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.6404-0 is amended as follows:
    1. The introductory text is revised.
    2. Entries are added for Sec.  301.6404-4.
    The addition reads as follows:


Sec.  301.6404-0  Table of contents.

    This section lists the paragraphs contained in Sec. Sec.  301.6404-
1 through 301.6404-4.
* * * * *
Sec.  301.6404-4 Suspension of interest and certain penalties where
the Internal Revenue Service does not contact the taxpayer.

    (a) Suspension.
    (1) In general.
    (2) Treatment of amended returns and other documents.
    (i) Amended returns filed on or after December 21, 2005, that
show an increase in tax liability.
    (ii) Amended returns that show a decrease in tax liability.
    (iii) Amended return and other documents as notice.
    (iv) Joint return after filing separate return.
    (3) Separate application.
    (4) Duration of suspension period.
    (5) Example.
    (6) Notice of liability and the basis for the liability.
    (i) In general.
    (ii) Tax attributable to TEFRA partnership items.
    (iii) Examples.
    (7) Providing notice by the IRS.

[[Page 34202]]

    (i) In general.
    (ii) Providing notice in TEFRA partnership proceedings.
    (b) Exceptions.
    (1) Failure to file tax return or to pay tax.
    (2) Fraud.
    (3) Tax shown on return.
    (4) Gross misstatement.
    (i) Description.
    (5) [Reserved].
    (c) Special rules.
    (1) Tentative carryback and refund adjustments.
    (2) Election under section 183(e).
    (d) Effective/applicability date.

    Par. 3. Section 301.6404-4 is added to read as follows:


Sec.  301.6404-4  Suspension of interest and certain penalties where
the Internal Revenue Service does not contact the taxpayer.

    (a) Suspension--(1) In general. Except as provided in paragraph (b)
of this section, if an individual taxpayer files a return of tax
imposed by subtitle A on or before the due date for the return
(including extensions) and the Internal Revenue Service (IRS) does not
timely provide the taxpayer with a notice specifically stating the
amount of any increased liability and the basis for that liability,
then the IRS must suspend any interest, penalty, addition to tax, or
additional amount with respect to any failure relating to the return.
This suspension is computed by reference to the period of time the
failure continues to exist. The notice described in this paragraph
(a)(1) is timely if provided before the close of the eighteen-month
period (thirty-six month period in the case of notices provided after
November 25, 2007) beginning on the later of the date on which the
return is filed or the due date of the return without regard to
extensions.
    (2) Treatment of amended returns and other documents--(i) Amended
returns filed on or after December 21, 2005, that show an increase in
tax liability. If a taxpayer, on or after December 21, 2005, provides
to the IRS an amended return or one or more other signed written
documents showing an increase in tax liability, the date on which the
return was filed will, for purposes of this paragraph (a), be the date
on which the last of the documents was provided. Documents described in
this paragraph (a)(2)(i) are provided on the date that they are
received by the IRS.
    (ii) Amended returns that show a decrease in tax liability. If a
taxpayer provides to the IRS an amended return or other signed written
document that shows a decrease in tax liability, any interest, penalty,
addition to tax, or additional amount will not be suspended if the IRS
at any time proposes to adjust the changed item or items on the amended
return or other signed written document.
    (iii) Amended return and other documents as notice. As to the items
reported, an amended return or one or more other signed written
documents showing that the taxpayer owes an additional amount of tax
for the taxable year serves as the notice described in paragraph (a)(1)
of this section.
    (iv) Joint return after filing separate return. A joint return
filed under section 6013(b) is subject to the rules for amended returns
described in this paragraph (a)(2). The IRS will not suspend any
interest, penalty, addition to tax, or additional amount on a joint
return filed under section 6013(b) unless each spouse, if required to
file a return, filed a timely separate return.
    (3) Separate application. This paragraph (a) shall be applied
separately with respect to each item or adjustment.
    (4) Duration of suspension period. The suspension period described
in paragraph (a)(1) of this section begins the day after the close of
the eighteen-month period (thirty-six month period, in the case of
notices provided after November 25, 2007) beginning on the later of the
date on which the return is filed or the due date of the return without
regard to extensions. The suspension period ends twenty-one days after
the earlier of the date on which the IRS mails the required notice to
the taxpayer's last known address, the date on which the required
notice is hand-delivered to the taxpayer, or the date on which the IRS
receives an amended return or other signed written document showing an
increased liability.
    (5) Example. The following example illustrates the rules of this
paragraph (a):

    Example. An individual taxpayer timely files an income tax
return for taxable year 2004 on the due date of the return, April
15, 2005. On December 11, 2006, the taxpayer mails to the IRS an
amended return reporting an additional item of income and an
increased tax liability for taxable year 2004. The IRS receives the
amended return on December 13, 2006. On January 16, 2007, the IRS
provides the taxpayer with a notice stating that the taxpayer has an
additional tax liability based on the disallowance of a deduction
the taxpayer claimed on his original return and did not change on
his amended return. The date the amended return was received
substitutes for the date that the original return was filed with
respect to the additional item of tax liability reported on the
amended return. Thus, the IRS will not suspend interest, penalties,
additions to tax, or additional amounts with respect to the
additional item of income and the increased tax liability reported
on the amended return. The suspension period for the additional tax
liability based on the IRS' disallowance of the deduction begins on
October 15, 2006, so the IRS will suspend interest, penalties,
additions to tax, and additional amounts with respect to the
disallowed deduction and additional tax liability from that date
through February 6, 2007, which is twenty-one days after the IRS
provided notice of the additional tax liability and the basis for
that liability.

    (6) Notice of liability and the basis for the liability--(i) In
general. Notice to the taxpayer must be in writing and specifically
state the amount of the liability and the basis for the liability. The
notice must provide the taxpayer with sufficient information to
identify which items of income, deduction, loss, or credit the IRS has
adjusted or proposes to adjust, and the reason for that adjustment.
Notice of the reason for the adjustment does not require a detailed
explanation or a citation to any Internal Revenue Code section or other
legal authority. The IRS does not have to incorporate all the
information necessary to satisfy the notice requirement within a single
document or provide all the information at the same time. Documents
that may contain information sufficient to qualify as notice, either
alone or in conjunction with other documents, include, but are not
limited to, statutory notices of deficiency, examination reports (for
example, Forms 4549 ``Income Tax Examination Changes,'' Forms 886-A
``Explanation of Items''), Forms 870 ``Waiver of Restrictions on
Assessments and Collection of Deficiency in Tax and Acceptance of
Overassessment,'' notices of proposed deficiency that allow the
taxpayer an opportunity for review in the Office of Appeals (30-day
letters), notices pursuant to section 6213(b) (mathematical or clerical
errors), and notice and demand for payment of a jeopardy assessment
under section 6861.
    (ii) Tax attributable to TEFRA partnership items. Notice to the
partner or the tax matters partner (TMP) of a partnership subject to
the Unified Audit and Litigation Procedures of subchapter C of chapter
63 of subtitle F of the Internal Revenue Code (TEFRA) that provides
specific information about the basis for the adjustments to partnership
items is sufficient notice if a partner could reasonably compute the
specific tax attributable to the partnership item based on the proposed
adjustments as applied to the partner's individual tax situation.
Documents provided by the IRS during a TEFRA partnership proceeding
that may contain information sufficient to satisfy the notice
requirements include, but are not limited to, a Notice of Final
Partnership Administrative Adjustment,

[[Page 34203]]

examination reports (for example, Forms 4549, Forms 886-A), or a letter
that allows the partners an opportunity for review in the Office of
Appeals (60-day letter).
    (iii) Examples. The following examples illustrate the rules of this
paragraph (a)(6).

    Example 1. During an audit of Taxpayer A's 2005 taxable year
return, the IRS questions a charitable deduction claimed on the
return. The IRS provides A with a ``30-day letter'' that proposes a
deficiency of $1,000 based on the disallowance of the charitable
deduction and informs A that A may file a written protest of the
proposed deficiency to the Office of Appeals within 30 days. The
letter includes as an attachment a copy of the revenue agent's
report that states that ``It has not been established that the
amount shown on your return as a charitable contribution was paid
during the tax year. Therefore, this deduction is not allowable.''
The information in the 30-day letter and attachment provides A with
notice of the specific amount of the liability and the basis for
that liability as described in this paragraph (a).
    Example 2. Taxpayer B is a partner in partnership P, a TEFRA
partnership for taxable year 2005. B claims a distributive share of
partnership income on B's Federal income tax return for 2005 filed
on April 17, 2006. On October 1, 2007, during the course of a
partnership audit of P for taxable year 2005, the IRS provides P's
TMP a ``60-day letter'' proposing to adjust P's income by $10,000.
The IRS had previously provided the TMP with a copy of the
examination report explaining that the adjustment was based on
$10,000 of unreported net income. On October 31, 2007, P's TMP
informs B of the proposed adjustment as required by Sec.
301.6223(g)-1(b). By accounting for B's distributive share of the
$10,000 of unreported income from P with B's other income tax items,
B can determine B's tax attributable to the $10,000 partnership
adjustment. The information in the 60-day letter and the examination
report allows B to compute the specific amount of the liability
attributable to the adjustment to the partnership item and the basis
for that adjustment and therefore satisfies the notice requirement
of paragraph (a). Because the IRS provided that notice to the TMP,
B's agent under the TEFRA partnership provisions, within eighteen
months of the April 17, 2006, filing date of B's return, any
interest, penalty, addition to tax, or additional amount with
respect to B's tax liability attributable to B's distributive share
of the $10,000 of unreported partnership income will not be
suspended under section 6404(g).

    (7) Providing notice by the IRS--(i) In general. The IRS may
provide notice by mail or in person to the taxpayer or the taxpayer's
representative. If the IRS mails the notice, it must be sent to the
taxpayer's last known address under rules similar to section 6212(b),
except that certified or registered mail is not required. Notice is
considered provided as of the date of mailing or delivery in person.
    (ii) Providing notice in TEFRA partnership proceedings. In the case
of TEFRA partnership proceedings, the IRS must provide notice of final
partnership administrative adjustments (FPAA) by mail to those partners
specified in section 6223. Within 60 days of an FPAA being mailed, the
TMP is required to forward notice of the FPAA to those partners not
entitled to direct notice from the IRS under section 6223. Certain
partners with small interests in partnerships with more than 100
partners may form a Notice Group and designate a partner to receive the
FPAA on their behalf. The IRS may provide other information after the
beginning of the partnership administrative proceeding to the TMP who,
in turn, must provide that information to the partners specified in
Sec.  301.6223(g)-1 within 30 days of receipt. Pass-thru partners who
receive notices and other information from the IRS or the TMP must
forward that notice or information within 30 days to those holding an
interest through the pass-thru partner. Information provided by the IRS
to the TMP is deemed to be notice for purposes of this section to those
partners specified in Sec.  301.6223(g)-1 as of the date the IRS
provides that notice to the TMP. A similar rule applies to notice
provided to the designated partner of a Notice Group, and to notice
provided to a pass-thru partner. In the foregoing situations, the TMP,
designated partner, and pass-thru partner are agents for direct and
indirect partners. Consequently, notice to these agents is deemed to be
notice to the partners for whom they act.
    (b) Exceptions--(1) Failure to file tax return or to pay tax.
Paragraph (a) of this section does not apply and interest will not be
suspended with respect to any penalty imposed by section 6651.
    (2) Fraud. Paragraph (a) of this section does not apply and
interest will not be suspended with respect to any interest, penalty,
addition to tax, or additional amount in a case involving fraud. Fraud
has the same meaning in this paragraph (b) as in section 6501(c)(1) and
is not attributed from one taxpayer to another taxpayer. If a taxpayer
files a fraudulent return for one year, paragraph (a) of this section
may apply to any other tax year of the taxpayer that does not involve
fraud. Fraud affecting one item on a return precludes paragraph (a) of
this section from applying to any other items on that return.
    (3) Tax shown on return. Paragraph (a) of this section does not
apply and interest will not be suspended with respect to any interest,
penalty, addition to tax, or additional amount with respect to any tax
liability shown on a return.
    (4) Gross misstatement--(i) Description. Paragraph (a) of this
section does not apply and interest will not be suspended with respect
to any interest, penalty, addition to tax, or additional amount with
respect to a gross misstatement. A gross misstatement for purposes of
this paragraph (b) means--
    (A) A substantial omission of income as described in section
6501(e)(1) or section 6229(c)(2);
    (B) A gross valuation misstatement within the meaning of section
6662(h); or
    (C) A misstatement to which the penalty under section 6702(a)
applies.
    (ii) If a gross misstatement occurs, then interest will not be
suspended with respect to any items of income omitted from the return
and with respect to overstated deductions, even though one or more of
the omitted items would not constitute a substantial omission, gross
valuation misstatement, or misstatement to which section 6702(a)
applies.
    (5) [Reserved].
    (c) Special rules--(1) Tentative carryback and refund adjustments.
If an amount applied, credited, or refunded under section 6411 exceeds
the overassessment properly attributable to a tentative carryback or
refund adjustment, any interest, penalty, addition to tax, or
additional amount with respect to the excess will not be suspended.
    (2) Election under section 183(e). If a taxpayer elects under
section 183(e) to defer the determination as to whether the presumption
applies that an activity is engaged in for profit, the 18-month (or 36-
month) notification period described in paragraph (a)(1) of this
section or, if that period has passed as of the date the election is
made, the suspension period described in paragraph (a)(4) of this
section will be tolled for the period to which the election applies.
Tolling will begin on the date the election is made and end on the
later of the date the return for the last taxable year to which the
election applies is filed or is due without regard to extensions.
    (d) Effective/applicability date. The rules of this section apply
as of the date of publication of a Treasury decision adopting these
rules as final regulations in the Federal Register.

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E7-12082 Filed 6-20-07; 8:45 am]

BILLING CODE 4830-01-P