The Tax Court properly determined that the extended six-year limitations period did not apply to a deficiency generated by a partnership’s overstatement of its in a reset note, thereby lowering the amount of gross income reported in its return. Basis overstatements are not an omission from gross income for purposes of Code Sec. 6501(e)(1)(A) ; therefore, the Notice of Final Partnership Administrative Adjustment (FPAA) was untimely because it was not issued within the three-year limitations period.
However, the matter was remanded to the Tax Court to decide whether the IRS’s was entitled to assess taxes for tax years not barred by the limitation period based on the adjustments to the tax year at issue. The Tax Court’s order stating the IRS could not assess taxes related to the adjustments related to tax year at issue. The Tax Court did not discuss the differences between assessing taxes and adjusting the tax treatment of partnership items and the applicability of the statute of limitations thereto. Moreover, in an earlier order the Tax Court held that the IRS could assess taxes for subsequent open years based on adjustments to partnership items for an earlier, closed year.
Unpublished opinion affirming in part and remanding in part unpublished Tax Courts orders, copies of which are attached.
Wilmington Partners L.P., CA-2, 2012-2 ustc ¶50,557
Code Sec. 6226
CCH Reference – 2012FED ¶37,709.70
Code Sec. 6229
CCH Reference – 2012FED ¶37,749.13
Code Sec. 6501
CCH Reference – 2012FED ¶38,971.13
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CCH Reference – TRC IRS: 30,152.15
CCH Reference – TRC IRS: 30,152.40
CCH Reference – TRC PART: 60,352.10