- 32 -
(1984); see Pallottini v. Commissioner, 90 T.C. 498, 503 (1988),
and cases cited therein.
The legislative history of section 183(e)(4) is consistent
with the literal language of sections 183(e)(4), 6512(b),
6511(c), and 6501(c)(4). Senate Report 94-938 explains that
Congress intended that a section 183(e)(4) election would only
extend the period for assessment of a deficiency.
Explanation of provision
The committee amendment revises present law (sec.
183(e)) to provide that if a taxpayer elects to
postpone the determination of his conduct of an
activity under the presumption provisions, the
statutory period for the assessment of any deficiency
specifically attributable to that activity during any
year in the 5 (or 7) year period shall not expire until
at least two years after the due date of the taxpayer's
income tax return for his last taxable year in the
period. This provision is the same as that in the
House bill.
If a taxpayer makes an election under section
183(e) of present law and postpones a determination
whether he engaged in a particular activity for profit,
the making of this election automatically extends the
statute of limitations, but only with regard to
deductions which might be disallowed under section 183.
The taxpayer would not have to agree to extend the
statute of limitations for any other item on his return
during the 5 (or 7) year period. On the other hand,
even if the taxpayer has petitioned the Tax Court with
regard to an unrelated issue on his return for any year
in the same period, the Service will be able to issue a
second notice of deficiency relating to a section 183
issue as to any taxable year in the period.
In order to assure the Service adequate time to
reexamine the section 183 issue after the suspension
period has ended, this new provision allows the Service
two years after the end of the period in which to
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