Split High Court Finds No Extended Assessment for Basis Overstatements

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Finding its 1958 ruling in Colony Inc. v. Commissioner is still controlling, a divided Supreme Court rules that an overstatement of basis resulting from a taxpayer's use of a tax shelter did not trigger the extended six-year assessment period under tax code Section 6501(e)(1)(A). The 5-4 ruling affirms a Fourth Circuit finding that a partnership's use of a tax shelter transaction to avoid capital gains taxes by overstating its basis in goods sold is not an omission from gross income triggering the extended assessment period. “[Home Concrete] is an important decision that reinforces both the stare decisis doctrine and that the government's ability to issue regulations is not unbridled, even in light of Brand X,” Kim Marie Boylan, a partner with White & Case in Washington, tells BNA.

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