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under section 6501(e) applies. In the instant cases, the
parties’ dispute focuses on the denominator.
Two aspects of this dispute make it clear that more is
involved than meets the eye, as follows:
Firstly, although the statutory language is “the amount of
gross income stated in the return” (emphasis added), both sides
agree that, where the taxpayer is a partner in a 1st-tier
partnership, the language is treated as including amounts that do
not appear anywhere on the only document that has been filed as
the taxpayer’s tax return.
Secondly, although the potential for the parties’ dispute
herein has existed since the 1934 enactment of the predecessor of
section 6501(e)(1)(A), both sides agree that this is a matter of
first impression.
In light of the foregoing, we start our analysis with
matters that are not in dispute between the parties, in order
better to understand the context in which the disputed matters
operate.
III. Evolution of the Statute
Section 250(d) of the Revenue Act of 1918 (Pub. L. 65-254,
40 Stat. 1057, 1083) provided a general 5-year statute of
limitations, but no limit in the case of fraud.
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