United States v Home Concrete & Supply LLC.
April 25, 2012
Case #: 11-139
Breyer, J., joined by Roberts, C.J., and Thomas and Alito, JJ., and Scalia, J., except Part IV-C. Scalia, J., filed an opinion concurring in part and concurring in the judgment. Kennedy, J., filed a dissenting opinion, which Ginsburg, Sotomayor, and Kagan, JJ., joined.
Full Text Opinion: http://www.supremecourt.gov/opinions/11pdf/11-139.pdf
Administrative Law: 26 U.S.C. §6501(e)(1))(A), which extends the period for detecting mistakes in tax returns from 3 years to 6 years only applies to complete omissions. It does not apply to basic understatements which lead to a smaller taxable gross income.
Respondent overestimated the value of sold property on its tax return which led to an understatement of its gross income in violation of the Internal Revenue Code. The ordinary period for detecting such deficiencies of the tax return is three years, but may be extended to six years if the taxpayer, "omits from gross income an amount properly includible therein." The Commissioner failed to detect the deficiency within the 3-year period but detected the error within the 6-year period. The Court of Appeals for the Fourth Circuit concluded that the extension did not apply to a basis overstatement which caused a smaller gross income on the tax return.
On appeal, the Supreme Court agreed with the Fourth Circuit that the extension does not apply. The Court relied heavily on its decision in Colony, Inc. v. Commissioner in regards to the word "omits" within 26 U.S.C. § 6501(e)(1)(A). The court interpreted the word "omits" like it did a similar provision in Colony, to not apply to understatements or reductions, but only when income is left out of the tax return. Because the statute is unambiguous the court does not need to gap fill.