Supreme Court limits IRS audit period

In United States vs. Home Concrete & Supply, LLC (No. 11–139, Decided April 25, 2012), the U.S. Supreme Court affirmed a three year statute of limitations for audits involving a common tax shelter issue. The Court’s summarized the issue as follows:

Ordinarily, the Government must assess a deficiency against a tax¬payer within “3 years after the return was filed,” 26 U. S. C. §6501(a), but that period is extended to 6 years when a taxpayer “omits from gross income an amount properly includible therein which is in ex¬cess of 25 percent of the amount of gross income stated in the return,”§6501(e)(1)(A). Respondent taxpayers overstated the basis of certain property that they had sold. As a result, their returns understated the gross income they received from the sale by an amount in excess of 25%. The Commissioner asserted the deficiency outside the 3-year limitations period but within the 6-year period.”

The U.S. Supreme Court held that the six-year provision did not apply to the overstatement of basis.


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