Omission of Foreign Asset Income Did Not Extended Limitations Period (Rafizadeh, TC)

The extended limitations period for omitting foreign asset income did not apply to the tax years at issue. Code Sec. 6501(e)(1)(A)(ii) ’s effective date limits its application to assets for which there was a Code Sec. 6038D reporting requirement when the income was omitted.

Background

The taxpayer timely filed his federal income tax returns but did not report income earned on a foreign account he held. After it issued a John Doe summons to obtain information, the IRS issued a deficiency notice to the taxpayer. The IRS conceded that the deficiency notice was issued more than three years after the expiration of the three-year limitations period. In addition, the IRS conceded the deficiency notice was issued more than three years after the John Doe summons was resolved.

Foreign Asset Income

Code Sec. 6501(e)(1)(A)(ii) does not simply incorporate the definition of assets in Code Sec. 6038D. It specifies assets subject to the reporting requirement. Thus, the extended limitations period is triggered by the omission of gross income from assets that are subject to the Code Sec. 6038D reporting requirements. Accordingly, such an omission extends the limitations period to six years. However, the taxpayer in this case did not have a preexisting obligation to report the information required by Code Sec. 6038D. The returns for the years at issue were all filed before Code Sec. 6038D ’s March 10, 2010, effective date.

BLAK Investments, 133 TC 431, Dec. 58,039, distinguished.

M. Rafizadeh, 150 TC —, No. 1, Dec. 61,101

 

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AUTHOR

CCHTaxGroup

All stories by: CCHTaxGroup