Deficiency Notices Were Timely; Taxpayers Substantially Understated Their Income; Gross Income Included Only Gain on Sale of Investment Assets, Not Amount Realized (Barkett, TC)

For purposes of determining whether married taxpayers substantially understated their income, their gross income included only their gain from sales of investment property, not the amount that they realized on the sales. This conclusion was consistent with Reg. §301.6501(e)-1(a)(1)(iii), and with prior Tax Court decisions in Insulglass Corp., Dec. 41,880 , and W. Schneider, Dec. 41,973(M).

None of these authorities was disturbed by the Supreme Court’s decision in

Home Concrete & Supply, LLC, 2012-1 ustc ¶50,315, that invalidated the regulation’s definition of omitted gross income. Since the stipulated amount of the taxpayers’ omitted income was more than 25 percent of the amount of their gross income, deficiency notices that were issued more than three years, but less than six years after they filed their returns were timely.

G.D. Barkett, 143 TC —, No. 6, Dec. 60,003

Other References:

Code Sec. 6501

CCH Reference – 2014FED ¶38,971.60

Tax Research Consultant

CCH Reference – TRC IRS: 30,152.05

 

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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