Academic journal article Journal of Accountancy

Two More Circuits Side with IRS on Extended Limitation Period for Basis Overstatement

Academic journal article Journal of Accountancy

Two More Circuits Side with IRS on Extended Limitation Period for Basis Overstatement

Article excerpt

The courts of appeals for the District of Columbia Circuit in two cases and for the Tenth Circuit in one case held that the IRS may retroactively apply regulations allowing the six-year limitation period of IRC [section] 6501 (e), rather than the general period of three years, for assessing an understatement of gross income arising from an overstatement of basis. The cases, which all overruled the Tax Court, are Intermountain Insurance Co. of Vail v. Commissioner (docket no. 10-1204, (D.C. Cir. 6/21/11)), UTAM Ltd. and DDM Management Inc. v. Commissioner (docket no. 10-1262 (D.C. Cir. 6/21/11)) and Salman Ranch Ltd. v. Commissioner (docket no. 09-9015 (10th Cir. 5/31/2011)). For previous Tax Matters coverage of Intermountain, see "Tax Court Refuses to Reconsider Overstatement of Basis Case," Aug. 2010, page 67, and "Application of Six-Year Statute of Limitations Denied Again," Nov. 2009, page 70).

The circuits are now widely split on the issue, with the Federal Circuit having reversed its taxpayer-friendly position in Salman (addressing other tax years than those considered by the Tenth Circuit) by granting deference (in Grapevine Imports Ltd. (docket no. …

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