TAX NEWS - January 2010

Coordination of docketed tax court cases involving a substantial omission of income resulting from an overstatement of basis

On November 23, 2009 the Internal Revenue Service (IRS) issued a Chief Counsel Notice (CC-2010-001), explaining the procedures for handling docketed Tax Court cases in which an entity has claimed an overstated basis in a sold asset resulting in an omission from gross income exceeding 25 percent of the income stated on the return.

On September 24, 2009 the IRS released temporary regulations (T.D. 9466), that define an omission from gross income for purposes of the six-year minimum period for assessment of tax. As discussed in our November 2009 publication, the temporary regulations provide that outside the context of a trade or business, any basis overstatement that leads to an understatement of gross income under IRC Section 61(a) constitutes an omission from gross income for purposes of IRC Sections 6501(e)(1)(A) and 6229(c)(2).

The temporary regulations apply to taxable years with respect to which the applicable period of limitations for assessing tax did not expire before September 24, 2009. CC-2010-001 clarifies that the temporary regulations apply to any docketed Tax Court case that is open under the 6-year statute on the effective date of the temporary regulations, and for which no final decision has been entered.

The notice requires coordination with the Office of Associate Chief Counsel for docketed Tax Court cases in which the temporary regulations may apply with regard to notifying the Tax Court with respect to the application of the temporary regulations.