Attorney-at-Law

“TELL ME, PRETTY MAIDEN, TELL ME”

In Uncategorized on 06/30/2014 at 22:59

No, I’m not rehearsing the replacements for the original Florodora sextette, rather echoing Judge Dawson’s instructions to Thomas J. Hickman, in 2014 T.C. Memo. 131, filed 6/30/14.

Tom claims he told IRS he received a $137K ESOP distribution, but it was six years ago. So the SOL has run…but has it?

Tom rolled his ESOP money into his personal IRA, but never picked up the money on his 1040. And when IRS disqualified the ESOP retroactively to Day One, thereby blowing up his rollover to his IRA, the question was whether Tom satisfied the Sec. 6501(e)(1)(A)(ii) tell-me provision.

Surely you remember the Sec. 6501(e)(1)(A)(ii) tell-me provision. No? Well, Judge Dawson has it down pat.

“Section 6501(e)(1)(A) extends the three-year period of limitations to six years where the taxpayer ‘omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return’. In computing the amount of gross income omitted, any amounts ‘disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature and amount of such item’ are not taken into account. Sec. 6501(e)(1)(A)(ii).” 2014 T. C. Memo. 131, at p. 10. (Footnote omitted, but read it; Congress moved the provision later).

The taxpayer has to provide a clue to IRS to cut the SOL to three years, but it has to be sufficiently detailed to let IRS to decide to audit the return.

Tom fails the test. The statement has to be made on a return, or attached to a return, and Tom didn’t, exactly.

Tom claims a K-1, a Form SS-4, and Form 5498 (listing Tom as owner of a nominee account) are “adjuncts” to the return. But none of this was attached to Tom’s return, and it doesn’t prove more than Tom and his IRA were partners in a LLC.

No go.

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