Statute Of Limitations Quiz


Facts & Law:

A. Income taxes must be assessed within 3 years of the later of the date the return is filed or the due date of the return.

B. However, the assessment period remains open indefinitely “in the case of a false or fraudulent return with the intent to evade tax.”

C. A shareholder in a Subchapter S corporation is taxable on his or her pro rata share of the net income of the corporation.

D. A Subchapter S corporation files a fraudulent return. The taxpayer-shareholder had nothing to do with the preparation or filing of the return, and was not knowledgeable of the fraud.


Can the IRS assess the taxpayer for a corrected share of the income of the corporation more than 3 years after the filing and due date of the return?


No, according to the IRS.

Interestingly, fraud by one spouse in filing a joint tax return keeps the statute open for the other spouse. That was not persuasive here, because spouses are jointly and severally liable for joint return taxes.

In Vincent Allen, 128 TC 37 (2007), the Tax Court held that an income tax return preparer's fraud kept a taxpayer's income tax return open indefinitely. However, that precedent was not applicable here because the intent in that case was to evade the taxpayer’s tax – that was not the case here.

Chief Counsel Advice 201238026


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

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Charles (Chuck) Rubin
Gutter Chaves Josepher Rubin Forman Fleisher P.A.

A tax and business attorney who assists clients in preserving & enhancing individual, family &... View Profile »

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