§ 301.6222(a)-2 Application of consistent reporting and notification rules to indirect partners.

(a) In general. The consistent reporting requirement of § 301.6222(a)-1 is generally applied with respect to the source partnership. For purposes of this section, the term source partnership means the partnership (within the meaning of section 6231(a)(1)) from which the partnership item originates. (b) Indirect partner files consistently with source partnership. An indirect partner who treats an item from a source partnership in a manner consistent with the treatment of that item on the source partnership's return satisfies the consistency requirement of section 6222(a) regardless of whether the indirect partner treats that item in a manner consistent with the treatment of that item by the pass-thru partner through which the indirect partner holds the interest in the source partnership. Under these circumstances, therefore, the Internal Revenue Service shall not send to the indirect partner the notice described in section 6231(b)(1)(A). (c) Indirect partner files inconsistently with source partnership—(1) Indirect partner notifies the Internal Revenue Service of inconsistency. An indirect partner who— (i) Treats an item from a source partnership in a manner inconsistent with the treatment of that item on the source partnership's return; and (ii) Files a statement identifying the inconsistency with the source partnership in accordance with § 301.6222(c)-1, shall not be subject to a computational adjustment to conform the treatment of that item to the treatment of that item on the return of the source partnership. (2) Indirect partner does not notify the Internal Revenue Service of inconsistency. Except as provided in paragraph (b)(3) of this section, an indirect partner who— (i) Treats an item from a source partnership in a manner inconsistent with the treatment of that item on the source partnership's return; and (ii) Fails to file a statement identifying the inconsistency with the source partnership in accordance with § 301.6222(b)-1, is subject to a computational adjustment to conform the treatment of that item to the treatment of that item on the return of the source partnership. (3) Indirect partner files consistently with a pass-thru partner that notifies the Internal Revenue Service of the inconsistency. If an indirect partner treats an item from a source partnership in a manner consistent with the treatment of that item by a pass-thru partner through which the indirect partner holds the interest in the source partnership and that pass-thru partner— (i) Treats that item in a manner inconsistent with the treatment of that item on the source partnership's return; and (ii) Files a statement identifying the inconsistency with the source partnership in accordance with § 301.6222(b)-1, the indirect partner is not subject to a computational adjustment to conform to the treatment of that item on the return of the source partnership. (d) Examples. The following examples illustrate the principles of this section: (e) Effective date. This section is applicable to partnership taxable years beginning on or after October 4, 2001. For years beginning prior to October 4, 2001, see § 301.6222(a)-2T contained in 26 CFR part 1, revised April 1, 2001.