77TH CONG. , 2D SESS.-CH. 619-OCT. 21, 1942 SEC. 227. AMENDMENTS TO SECTION 734. (a) IN GENERAL. -Section 734 is amended to read as follows: "SEC. 734. ADJUSTMENT IN CASE OF POSITION INCONSISTENT WITH PRIOR INCOME TAX LIABILITY. "(a) DEFINITIONS. -For the purposes of this section- "(1) TAXPAYER. -T he term 'taxpayer' means any person subject to a tax under the applicable revenue Act. "(2) INCOME TAx. -The term 'income tax' means an income tax imposed by Chapter 1 or Chapter 2A of this title; Title I and Title IA of the Revenue Acts of 1938, 1936, and 1934; Title I of the Revenue Acts of 1932 and 1928; Title II of the Revenue Acts of 1926 and 1924; Title II of the Revenue Acts of 1921 and 1918; Title I of the Revenue Act of 1917; Title I of the Revenue Act of 1916; or section II of the Act of October 3, 1913; a war profits or excess profits tax imposed by Title III of the Revenue Acts of 1921 and 1918; or Title II of the Revenue Act of 1917; or an income, war profits, or excess profits tax imposed by any of the foregoing provisions, as amended or supplemented. "(3) PRIOR TAXABLE YER.-A taxable year beginning after December 31, 1939, shall not be considered a prior taxable year. "(4) The term 'predecessor of the taxpayer' means- "(A) A person which is a component corporation of the taxpayer within the meaning of section 740; and "(B) A person which on April 1, 1941, or at any time there- after, controlled the taxpayer. The term 'controlled' as herein used shall have the same meaning as 'control' under section 112 (h), and "(C) Any person in an unbroken series ending with the taxpayer if subparagraph (A) or (B) would apply to the relationship between the parties. "(b) CIRCUMSTANCES OF ADJUSTMENT.- "(1) If- "(A) in determining at any time the tax of a taxpayer under this subchapter an item affecting the determination of the excess profits credit is treated in a manner inconsistent with the treatment accorded such item in the determination of the income-tax liability of such taxpayer or a predecessor for a prior taxable year or years, and "(B) the treatment of such item in the prior taxable year or years consistently with the determination under this sub- chapter would effect an increase or decrease in the amount of the income taxes previously determined for such taxable year or years, and '(C) on the date of such determination of the tax under this subchapter correction of the effect of the inconsistent treatment in any one or more of the prior taxable years is prevented (except for the provisions of section 3801) by the operation of any law or rule of law (other than section 3761, relating to compromises), then the correction shall be made by an adjustment under this section. If in a subsequent determination of the tax under this subchapter for such taxable year such inconsistent treatment is not adopted, then the correction shall not be made in connection with such subsequent determination. "(2) Such adjustment shall be made only if there is adopted in the determination a position maintained by the Commissioner (in case the net effect of the adjustment would be a decrease in the income taxes previously determined for such year or years) or by 921 55 Stat. 27. 26U.S.C., Supp. I, §734. 53 Stat. 4, 104. 26U. S. C. §§ 1-396, 500-511; Supp. I, §§4-404, 500 -506. Ante, pp . 802,894. Post, p. 923. "Controlled." 53 Stat. 40 . 26U.S. C. 112 (h). 53 Stat. 471. 26 U. S.C. §3801. 53 Stat. 462. 26U.S.C.§3761. Position inconsist- ent with prior treat- ment. 56 STAT.]
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