Update on New Tax Issue on 6 Year Statutes For Asset Basis Understatements

by James Davis - Posted In: Tax

Contrary to the Seventh Circuit Court of Appeals decision just three weeks ago, the U.S. Court of Appeals for the Fourth Circuit has just held that the extended 6-year limitations period does not apply to an omission of more than 25 percent of gross income that resulted when a taxpayer used a tax shelter that caused a basis overstatement (Home Concrete & Supply LLC v. United States, 4th Cir., No. 09-2353, 2/7/11).  There is now a significant split within the various U.S. Court of Appeals:  the 9^th, 4^th Circuits and the U.S. Court of Appeals for the Federal Circuit holds that the 6-year does not apply while the 7^th and 5^th Circuits holds that it does apply.  The Court of Appeals with jurisdiction over Florida, the 11^th, has not yet ruled.  It is likely that the issue will be ultimately decided by the United States Supreme Court.  Stay tuned.

Tags: James B. Davis