Another Federal Court of Appeals Weighs in on the Applicability of the Six-Year Statute of Limitations Period to an Overstatement of Basis

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The U.S. Court of Appeals for the D.C. Circuit recently reversed two U.S. Tax Court decisions and held that an overstatement of basis constitutes an omission from gross income that is subject to the six-year statute of limitations period under sections 6229(c)(2) and 6501(e)(1)(A). These decisions further the conflict among the appellate courts regarding the applicability of the extended limitations period.

On June 21, 2011, another U.S. Court of Appeals weighed in on the dispute between taxpayers and the Internal Revenue Service (IRS) as to whether an overstatement of basis constitutes an omission from gross income that triggers the six-year statute of limitations period under sections 6229(c)(2) and 6501(e)(1)(A) of the Internal Revenue Code. In Intermountain Ins. Serv. of Vail, LLC v. Commissioner, No. 10-1204 (D.C. Cir. 2011) (Intermountain II), rev’g T.C. Memo 2009-195 (Intermountain I), and UTAM, Ltd. v. Commissioner, No. 10-1262 (D.C. Cir. 2011), rev’g T.C. Memo 2009-253, the U.S. Court of Appeals for the District of Columbia reversed the U.S. Tax Court’s decision and held that an overstatement of basis does constitute an omission from gross income that is subject to a six-year statute of limitations period.

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