U.S. SUPREME COURT SIDES WITH THE TAXPAYER - BUT DEBATE MAY CONTINUE

The U.S. Supreme Court has handed down its final verdict on whether the IRS will have six years to consider assessing additional taxes on the gain from a sale. And the taxpayer won.

Normally, the IRS has three years after a taxpayer files a tax return to assess any additional tax. However, that period is extended to six years if the taxpayer omits more than 25 percent of the income that should have been shown on the return.

For years, taxpayers and the IRS have been at odds over whether the six-year period applies if a taxpayer overstates the tax basis of an asset that is sold, thus reducing the gain reported on the sale. The IRS had issued regulations to the effect that, if the unreported gain exceeded the 25-percent threshold, the six-year assessment period applied.

In litigation, some courts have agreed with the IRS, and some have taken the other approach.

Now, in United States v. Home Concrete & Supply, LLC (109 AFTR 2d, 2012-XXXX, April 25, 2012), the court has ruled that the six-year assessment period does not apply to the overstatement of tax basis in connection with the sale of an asset.

While Home Concrete Supply may be the last word from the courts on this subject, it remains to be seen whether the IRS will approach Congress seeking a legislative change to allow for the longer assessment period.

 
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