From Los Angeles Income Tax Litigator Attorney Bruce Givner, "The Eleventh Circuit Court of Appeals for the Eleventh Circuit has held that a Tax Court petition filed by former shareholder-officers of a corporation suspended the statute of limitations on the collection of the corporation's multimillion dollar income tax liability."
Generally, any assessment of a federal income tax liability must be made within three years after the later of the date the tax return was filed or the due date of the tax return. IRC Code Sec. 6503(a)(1). However, if the federal income tax liability is the subject of a pending Tax Court case, the three-year statute of limitations period is suspended. IRC Code Sec. 6503(a)(1). Furthermore, if the matter involves transferee liability, the Internal Revenue Service (IRS) has an additional year to assess the federal income tax liability against a transferee of assets of the taxpayer-transferor, in this case, the corporation. IRC Code Sec. 6901(c)(1).
The Tax Court held for Shockley, concluding that 1) the statute of limitations period to assess the transferee liability had expired, and 2) that a Tax Court petition filed in response to an invalid notice of deficiency did not suspend the statute of limitations.
On the Government's appeal, the Court of Appeals concluded that the statute of limitations, barring tax collections or assessment by the IRS, is to be strictly construed in favor of the government. Therefore the Tax Court petition filed in response to an invalid notice did suspend the statute of limitations. Accordingly, the notices of transferee liability issued to the shareholder-officers within one year after the limitations period expired with regard to the corporation were timely. Shockley v. Comm.,(CA 11 7/11/2012)
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