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The Constitution, the Supreme Court and the Overstatement of Basis Constituting an Understatement of Income

Product Code - TMA61
Speaker(s): Kim Marie Boylan, White & Chase, Don Williamson, American University and Blair Staley, Bloomsberg University of Pennsylvania
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To resolve conflicts among no less than six circuit courts of appeal, the Supreme Court next year will decide if an overstatement in basis can create an understatement of income of more than 25% so as to trigger a six year statute of limitations on assessment. Resolution of this issue will clarify if the Supreme Court’s decision earlier this year in Mayo permits regulations to be issued during the pendency of litigation that will reverse an over 50 year old decision of the Supreme Court.

The litigation also calls into question whether temporary regulations promulgated without the benefit of public comment as required by the Administrative Procedures Act are binding on taxpayers and courts. Finally, this issue offers policy makers the opportunity to evaluate the appropriate balance between the judicial and executive branches of government to interpret statutes.

The webinar will review the legislative history of the six year statute of limitations, analyze the court cases interpreting it to date and suggest options the Supreme Court and ultimately Congress have to resolve whether regulations may always overturn prior court decisions.

Presentation Outline:

  • Explain 6 year statute under §275 (1939 Code) and §6501(e) with 2010 amendments
  • Explain §6229(c) with 2010 amendments
  • Review Colony
  • Son-of-Boss cases that raise issue again
  • Initial court opinions
    • Intermountain I (T.C. 2009)
    • Salman Ranch I (Fed. Cir. 2009)
    • Bakersfield (9th Cir. 2009) inviting IRS to promulgate regs.
  • Regulatory response
    • 7805 effective date
    • Temp. regs. (Sept. 2009) final (Dec. 2010)
  • Intermountain II (May 2010)
    • APA adherence issue
  • Mayo (January 2011)
    • Chevron
  • Brand X
  • Circuit Court opinions
    • Pro-gov't - Beard (7th Cir.); Grapevine (Fed Cir); Salman Ranch II (10th Cir.); Intermountain (D.C. Cir.)
    • Pro-taxpayer - Burks (5th Cir.): Home Concrete (4th Cir.)
  • Supreme Court grants cert. in Home Concrete (September 20 II)

Upon completion of this program, participants will be able to:

  • Understand the circumstance whereby a 6 year statute oflimitation may apply to a taxpayer.
  • Appreciate the issue of whether a Supreme Court case can be overruled by a subsequent
  • IRS regulation.
  • Understand the need for adherence to the APA procedures for temporary regulations.
  • Appreciate that the resolution of this issue has enormous impact on the relationship of the executive and judicial branches of government.


Prerequisite: None
Level: Intermediate to Advanced
Delivery Method: Group Live
Recommended CPE Credit: 1 credit

Kim Marie Boylan, White & Chase, Don Williamson, American University and Blair Staley, Bloomsberg University of Pennsylvania

Kim Marie Boylan is a partner with the law firm of White & Case in Washington, D.C. where she specializes in tax controversy litigation.

Professor Donald Williamson
is the Howard S. Dvorkin Faculty Fellow and Executive Director of the Kogod Tax Center at American University.

Dr. A. Blair Staley
is an accounting professor in the College of Business, Bloomsburg University of Pennsylvania.