Ridge L. Harlan and Marjory C. Harlan - Page 20




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          the language that the Ways and Means Committee used to trigger a            
          broadening of the fraud exception (sec. 276(a) of the House                 
          bill).                                                                      
               In conference, the House receded and the Senate amendments             
          were agreed to.  See H. Rept. (Conference Report) 73-1385, at 25            
          (1934), 1939-1 C.B. (Part 2) 627, 634.  None of the referenced              
          committee reports explains the intended meaning of the phrase               
          “the amount of gross income stated in the return”.  Also, we have           
          not found in the hearings or the floor debates any discussion of            
          the meaning of that phrase.  See Estate of Klein v. Commissioner,           
          63 T.C. 585, 594 (1975), affd. 537 F.2d 701 (2d Cir. 1976).                 
               The language of section 275(c) continued unchanged in the              
          later revenue acts and through the Internal Revenue Code of 1939.           
               Section 275(c), I.R.C. 1939, became section 6501(e)(1)(A),             
          I.R.C. 1954, with three modifications, as follows:                          
                    (1) the 5-year limitations period of former law was               
               changed to 6 years;                                                    
                    (2) “gross income” from a trade or business was                   
               redefined for these purposes to not include the subtraction            
               for cost of sales or services; and                                     
                    (3) for purposes of the numerator of the fraction,                
               adequate disclosure of an item will preclude that item being           
               treated as omitted.                                                    
               The Ways and Means Committee report for H.R. 8300, which               
          became the Internal Revenue Code of 1954 (H. Rept. 83-1337,                 
          p. 107 (1954)), describes these changes as follows:                         







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