Larry's Tax Law

Basic Rules

IRC § 6501(a) generally requires the IRS to assess tax within three (3) years after a tax return is filed by the taxpayer. 

There are two (2) notable exceptions to this rule under IRC § 6501(c) and (e), namely:

1. Under IRC § 6501(c), an unlimited assessment period exists in the case of a false or fraudulent return where the taxpayer has the intent to evade tax; and
2. Under IRC § 6501(e), a six (6) year period for assessment exists in the case where the taxpayer understates gross income by more than 25 percent, unless there is adequate disclosure on the taxpayer’s original tax return.

In the case of a shareholder of an S corporation, the analysis is generally conducted at the shareholder level.  In other words, the focus is on the shareholder’s tax return, and the issue is whether there is a problem with that return that would extend the limitation period for assessment.

As we know from the basic rules, absent fraud or an undisclosed substantial understatement of gross income, the limitation period for assessment is three (3) years.  Likewise, absent fraud, an undisclosed substantial understatement of gross income extends the limitation period for assessment to six (6) years.

On April 17, 2019, Treasury issued its second installment of proposed regulations relating to Qualified Opportunity Zones (“QOZs”). The regulations are 169 pages in length, and (as suspected) are fairly complex. Nevertheless, Treasury addresses a significant number of important QOZ issues.

We will dive into the proposed regulations in some detail in subsequent blog posts. In this post, however, we provide a high-level overview of some of the more significant provisions in the proposed regulations.

Judge Ruwe ruled in Jeremy M. Jacobs and Margaret J. Jacobs v. Commissioner, 148 T.C. 24 (June 26, 2017), that a free lunch may exist today under Federal tax law. In this case, the taxpayers, owners of the Boston Bruins of the National Hockey League, paid for pre-game meals provided by hotels for the players and team personnel while traveling away from Boston for games.

Pursuant to the union collective bargaining agreement governing the Bruins, the team is required to travel to away games a day before the game when the flight is 150 minutes or longer. Before the away games, the Bruins provides the players and staff with a pre-game meal and snack. The meal and snack menus are designed to meet the players’ nutritional guidelines and maximize game performance.

During the tax years at issue, the taxpayers deducted the full cost of the meals and snacks. Upon audit, the IRS contended the cost of the meals and snacks were subject to the 50% limitation under Code Section 274(n)(1) which provides in part: