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(2) In determining the applicability of the 6-year
period of limitation on assessment and collection
provided in section 6501(e) (relating to omissions of
more than 25 percent of gross income), a partner’s
gross income includes his distributive share of
partnership gross income (as described in section
6501(e)(1)(A)(i)). In this respect, the amount of
partnership gross income from which was derived the
partner’s distributive share of any item of partnership
income, gain, loss, deduction, or credit (as included
or disclosed in the partner’s return) is considered as
an amount of gross income stated in the partner’s
return for the purposes of section 6501(e). For
example, A, who is entitled to one-fourth of the
profits of the ABCD partnership, which has $10,000
gross income and $2,000 taxable income, reports only
$300 as his distributive share of partnership profits.
A should have shown $500 as his distributive share of
profits, which amount was derived from $2,500 of
partnership gross income. However, since A included
only $300 on his return without explaining in the
return the difference of $200, he is regarded as having
stated in his return only $1,500 ($300/$500 of $2,500)
as gross income from the partnership.
In providing for an extended limitations period, the
Congress did not indicate why gross income, rather than adjusted
gross income or any other concept, was chosen as the touchstone
for the extended statute of limitations,9 nor did the Congress
provide a clue as to what is meant by “the return” for purposes
of determining the amount of the denominator in the 25-percent
calculation. Compare Colony, Inc. v. Commissioner, 357 U.S. 28
(1958), in which the Supreme Court relied on legislative history
to decide what is meant by “omits from gross income” for purposes
9Note that a taxpayer’s omission of gross income does not
necessarily result in an adjustment to the taxpayer’s taxable
income. See Colony, Inc. v. Commissioner, 357 U.S. 28, 36
(1958); Colestock v. Commissioner, 102 T.C. 380 (1994).
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