Page:United States Statutes at Large Volume 68A.djvu/201

 CH. 1—NORMAL TAXES AND SURTAXES

161

order to prevent amounts from being duplicated or omitted, except there shall not be taken into account any adjustment in respect of any taxable year to which this section does not apply, (b) LIMITATION ON T A X W H E R E ADJUSTMENTS A R E TIAL.-— (1) T H R E E YEAR ALLOCATION.^—If—

SUBSTAN-

(A) the method of accounting from which the change is made was used by the taxpayer in computing his taxable income for the 2 taxable years preceding the year of the change, and (B) the increase in taxable income for the year of the change which results solely by reason of the adjustments required by subsection (a)(2) exceeds $3,000, then the tax under this chapter attributable to such increase in taxable income shall not be greater than the aggregate of the taxes under this chapter (or under the corresponding provisions of prior revenue laws) which would result if one-third of such increase were included in taxable income for the year of the change and one-third of such increase were included for each of the 2 preceding taxable years. (2) ALLOCATION UNDER NEW METHOD OF ACCOUNTING.—If—

(A) the increase in taxable income for the year of the change which results solely by reason of the adjustments required by subsection (a)(2) exceeds $3,000, and (B) the taxpayer establishes his taxable income (under the new method of accounting) for one or more taxable years consecutively preceding the taxable year of the change for which the taxpayer in computing taxable income used the method of accounting from which the change is made, then the tax under this chapter attributable to such increase in taxable income shall not be greater than the net increase in the taxes under this chapter which would result if the adjustments required by subsection (a)(2) were allocated to the taxable year or years specified in subparagraph (B) to which.they are properly allocable under the new method of accounting and the balance of the adjustments required by subsection (a)(2) was allocated to the taxable year of the change. (3) SPECIAL

RULES

FOR

COMPUTATIONS

UNDER

PARAGRAPHS

(1) AND (2).•—For purposes of this subsection-— (A) There shall be taken into account the increase or decrease in tax for any taxable year preceding the year of the change to which no adjustment is allocated under paragraph (2) but which is affected by a net operating loss (as defined in section 172) or by a capital loss carryover (as defined in section 1212), determined with reference to taxable years with respect to which adjustments under paragraph (2) are allocated. (B) The increase or decrease in the tax for any taxable year for which an assessment of any deficiency, or a credit or refund of any overpayment, is prevented by any law or rule of law, shall be determined by reference to the tax previously determined (within the meaning of section 1314(a)) for such year. (C) In applying section 7807(b)(1), the provisions of chapter 1 (other than subchapter E, relating to self-employment income) § 481(b)(3)(C)

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