United States v. Home Concrete & Supply, LLC

132 S.Ct. 1836 (2012)


D must assess a deficiency against a taxpayer within “3 years after the return was filed.” The 3-year period is extended to 6 years when a 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.” Concrete (P) filed their tax return in April 2000. It underestimated the gain on the sale of property by overestimating its basis in the property.  This resulted in an understatement of the gross income received from the sale of the property and that understatement exceeded the statute's 25% threshold. D eventually discovered the issue and asserted a deficiency within the extended 6-year limitations period, but outside the default 3-year period. In a prior case, Colony, Inc. v. Commissioner, 357 U.S. 28 (1958), the court interpreted a provision of the Internal Revenue Code of 1939, the operative language of which is identical to the language in the current regulation. The Commissioner there had determined “that the taxpayer had understated the gross profits on the sales of certain lots of land for residential purposes as a result of having overstated the 'basis' of such lots by erroneously including in their cost certain unallowable items of development expense.” The court went on to hold that taxpayer misstatements, overstating the basis in property, do not fall within the scope of the statute.  In doing so, the court noted that the six-year text was not unambiguous. P appealed the new statutory interpretation that the six-year period applied. The lower court rule for P and D appealed. The Supreme Court granted certiorari.