A Final Partnership Administrative Adjustment (FPAA) issued by the IRS more than three years after the partnership filed its return was not untimely because the six-year limitations period for the assessment of taxes attributable to partnership items applied. The return claimed an overstated basis in property as a result of the partnership’s participation in a Son-of-Boss transaction, which was an “omission from gross income,” subject to the extended six-year statute of limitations under Code Sec. 6501(e)(1)(A). The regulations issued were entitled to Chevron deference because their interpretation of “omits from gross income” was a reasonable interpretation of congressional intent.
Contrary to the partnership’s argument Colony, Inc., SCt, 58-2 USTC ¶9593 did not apply to basis overstatements outside the trade or business context and, therefore, the IRS’s regulatory interpretation of Code Sec. 6501(e)(1)(A) was reasonable. Further, the regulations were applicable to the partnership since the case was pending before the court at the time the regulations became effective. Moreover, the preregulation state of the law was neither settled nor clear. The new regulations were not a post-hoc rationalization because the IRS intended to apply the new regulations to the pending cases that prompted them. Finally, since Colony, Inc. never applied to Code Sec. 6501(e)(1)(A) and Code Sec. 6229(c)(2), there was no settled law to change.
Reversing a Tax Court decision, 98 TCM 144, CCH Dec. 57,918(M), TC Memo. 2009-195.
Intermountain Insurance Service of Vail, LLC, CA-D.C., 2011-2 USTC ¶50,468
Code Sec. 6229
CCH Reference – 2011FED ¶37,749.13
Code Sec. 6501
CCH Reference – 2011FED ¶38,971.13
CCH Reference – 2011FED ¶38,971.76
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