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QUESTION 20 Stanley Strummer had the following items on his timely filed 2018 income tax return: Gross receipts $1,000,000 Cost of goods sold ($750,000) Capital gain Capital loss $50,000 ($75,000) Stanley inadvertently omitted some income on his 2018 return. What is the statute of limitations if he omitted $300,000 income on the return?
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Statute of limitation: It is a time frame in which IRS can initiate a process to collect taxes from the tax payers who defaulted in payment of tax owed, and outside of which tax payer is no longer responsible for the tax owed. When the return is filed, the time frame is 3 years (from the date of filing of return or due date of the return, whichever is later), lfdefaulted amount is less than 25% of gross income. 6 years (from the date of filing of return or due date of the return, whichever is later gross income. if defaulted amount is more than 25% of Coming to the question, Gross income = Gross receipts + Capital gain $1,000,000 + $50,000 -$1,050,000 ※ 25% of gross income-$1,050,000 x 25% 262,500 ** Defaulted amount or Omitted amount $300,000 Since the defaulted /omitted amount ($300,000) is more than $262,500 (25% of gross income), statute of limitation in this case would be 6 years.

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