Question

Tax Research Memo 2 TOPIC Not yet graded. Your (new) client, Tax Avoidance Partnership (TAP), recently caught the attention of the IRS. According to the IRS,TAP was created as a tax shelter; it engaged in property transactions designed to generate artificial tax losses. Those losses could then be allocated to the various partners allowing them to use those losses to offset the partners' other income. As part of the overall scheme, TAP effectively overstated the basis in the properties at iss allowed the partners to withdraw those losses. ue owned by TAP, which Fortunately, all of this occurred on a prior tax advisor's watch; you are just here to represent TAP during the current audit. All of these overstatements of basis occurred four and five years ago. Your client has questioned whether the actions by the IRS on this matter are timely or whether they might be time barred under the Code. Please research the issue and write a file memorandum that answers this question. Make sure that your memorandum discusses the applicable statutory provisions, any formal IRS positions on the issue, and any applicable caselaw. 9ees

Answer 1

As per statue limitation runs for 3 years in case there is no substantial understatement of income, hence in general cases same is 3 years, however same has been recently amended by US Congress to six years in case of substantial understatement of income after the US Supreme Court in Home Concrete & Supply, LLCsaid overstating your basis is not the same as omitting income.

Hence, in the above case the impact of losses needs to be considered before framing an opinion.