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taxpayer had acquired a 60-percent interest in real property and
was entitled to a depreciation deduction for 60 percent of the
improvements. The Commissioner sent a notice of deficiency after
the expiration of the 3-year period of limitations. The taxpayer
argued that her reporting of depreciation fully apprised the
Commissioner of all of the facts necessary to make a
determination of deficiency. This Court held, however, that such
reporting was not adequate because there was no mention of the
liquidation of the corporation on the tax return. See id.
Our holding is also consistent with the opinion of the Court
of Appeals in Phinney v. Chambers, 392 F.2d 680 (5th Cir. 1968).
In Phinney, a taxpayer incorrectly claimed a stepped-up basis in
her one-half interest in a community-owned installment note
issued in exchange for stock. The full value of the note had
been included in the estate of her deceased husband for estate
tax purposes. When the note was paid in full, the taxpayer
reported, on her individual income tax return, that the amount
collected was a sale of stock with an amount realized equal to
basis. When the Commissioner disallowed the stepped-up basis,
more than 3 years but less than 6 years after the taxpayer filed
her return, the taxpayer argued that she had adequately disclosed
the transaction on her Federal income tax return. The Court of
Appeals held that the taxpayer had not given the Commissioner a
chance to challenge the taxpayer’s contentions, because the
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Last modified: May 25, 2011