Federal Circuit: New Rules Justify Six-Year Limitations Period for Basis Overstatement

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New Treasury Department regulations changed the interpretation of what limitations period should be applied to a partnership tax return where overstatement of basis is an omission from gross income and therefore the government had six years to bring a claim, the Federal Circuit rules. The Federal Circuit holding reverses a Federal Claims court holding that the limitations period set out in Internal Revenue Code Section 6501(a) was not extended and only three years. The Federal Circuit's decision deepens a circuit split on the issue with the Federal Circuit joining the Seventh Circuit, while the Fourth and Fifth Circuits have held that the extended limitations period did not apply to overstatements of basis.