D.C. Circuit Overturns 'Intermountain,' Upholds Basis Overstatements Rules

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The D.C. Circuit overturns the U.S. Tax Court's two Intermountain rulings, finding Treasury regulations stating that an overstatement of basis resulting from the use of a tax shelter triggers the extended limitations period is entitled to Chevron deference. While the Tax Court's initial ruling on Intermountain Insurance Service of Vail LLC v. Commissioner led to the Internal Revenue Service promulgating the regulations stating that an overstatement of basis triggers the six-year limitations period of Internal Revenue Code Sections 6501(e)(1)(A) and 6229(c)(2), other circuits have already addressed the issue and have come to differing conclusions as to the validity of the regulations. The D.C. Circuit issues a second ruling upholding the six-year extended limitations period for overstatements of basis—that decision also found that the mailing of a final partnership administrative adjustment by IRS tolls an individual partner's limitation period under Section 6501.

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