United States v. Home Concrete & Supply, LLC

As a general matter, the Internal Revenue Service (IRS) has three years to assess additional tax if the agency believes that the taxpayer's return has understated the amount of tax owed. 26 U.S.C. 6501(a). That period is extended to six years, however, if the taxpayer "omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the [taxpayer's] return." 26 U.S.C. 6501(e)(1)(A). The questions presented are as follows:

1. Whether an understatement of gross income attributable to an overstatement of basis in sold property is an "omi[ssion] from gross income" that can trigger the extended six-year assessment period.

2. Whether a final regulation promulgated by the Department of the Treasury, which reflects the IRS's view that an understatement of gross income attributable to an overstatement of basis can trigger the extended six-year assessment period, is entitled to judicial deference.  

"Ordinarily, the Government must assess a deficiency against a taxpayer within “3 years after the return was filed,” 26 U. S. C. §6501(a),but that period is extended to 6 years when a taxpayer “omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return,”§6501(e)(1)(A). Respondent taxpayers overstated the basis of certain property that they had sold. As a result, their returns understated the gross income they received from the sale by an amount in excess of 25%. The Commissioner asserted the deficiency outside the 3-yearlimitations period but within the 6-year period. The Fourth Circuit concluded that the taxpayers’ overstatements of basis, and resulting understatements of gross income, did not trigger the extended limitations period.

Held: The judgment is affirmed."

Cert. granted 9/27/11. Decided 4/25/12.