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Supreme Court rules in tax case

The US Supreme Court [official website] ruled 5-4 [opinion, PDF] Wednesday in United States v. Home Concrete & Supply, LLC [SCOTUSblog backgrounder] that § 6501(e)(1)(A) [text] of the IRS code does not apply to an overstatement of basis. Ordinarily, the government must assess a deficiency against a taxpayer within "3 years after the return was filed." The three-year period is extended to six years, however, 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." The question before the court was whether this latter provision applies (and extends the ordinary three-year limitations period) when the taxpayer overstates his basis in property that he has sold, thereby understating the gain that he received from its sale. Following Colony, Inc. v. Commissioner [opinion], the court held that "the provision does not apply to an overstatement of basis. Hence the 6-year period does not apply." Justice Stephen Breyer delivered the opinion of the court, except as to Part IV-C. Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito joined the opinion in full. Justice Antonin Scalia filed an opinion concurring in part and concurring in the judgment. Justice Anthony Kennedy authored a dissenting opinion, joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.

The court affirmed the ruling [opinion, PDF] of the US Court of Appeals for the Fourth Circuit. The Supreme Court granted certiorari in the case in September and heard oral arguments [JURIST reports] in January.

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