Tax News

CCH (cch.taxgroup.com) reports:

  The IRS could not use the extended six-year limitations period to assess a deficiency where an individual overstated his basis in two S corporations following their sale, thereby lowering the amount of gross income reported on his return. Overstatement of basis is not an omission of gross income for purposes of Code Sec. 6501(e)(1)(A); therefore, the notice of deficiency sent to the taxpayer was untimely because it was not issued within the three-year limitations period.

  Under Colony, Inc. , SCt, 58-2 USTC ¶9593, and Bakersfield Energy Partners, LP , 128 TC 207, Dec. 56,966, the extended limitations period applies where specific income receipts have been "left out" of the gross income computation, not where an understatement results from overstatement of reported basis. The IRS's arguments that
Bakersfield was wrongly decided, and that Colony should be limited to cases involving the sale of goods or services, was rejected.

K.H. Beard, TC Memo. 2009-184, Dec. 57,903(M)

Other References:

 
Code Sec. 6501

  CCH Reference - 2009FED ¶38,971.13

  CCH Reference - 2009FED ¶38,971.76

  Tax Research Consultant

  CCH Reference - TRC IRS: 30,152.15