Late S Corporation Return Not an Income Disclosure, IRS Says

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The Internal Revenue Service Office of Chief Counsel, in a chief counsel advice memorandum released Aug. 16, said information disclosed in a late-filed S corporation return should be disregarded for purposes of determining whether there has been a substantial understatement of gross income triggering tax code Section 6501(e)'s extended six-year statute of limitations for assessments in a stockholder's previously filed income tax return.
The office in CCA 201333008 said information in the late-filed Form 1120-S, U.S. Income Tax Return for an S Corporation, “should be treated like information found in an amended return and disregarded” for purposes of determining the individual's disclosure of income in the timely Form 1040, U.S. Individual Income Tax Return, even though the S corporation return is referenced.
The Form 1120-S, if timely filed, should already be in IRS's possession when the individual's return reporting allocations from the S corporation is filed, the office said. “Where the Form 1120-S is filed after the original individual return, the IRS is not required to consider a theoretical, non-existent Form 1120-S in conjunction with the Form 1040,” it said.

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