- 35 -
the example given in sec. 1.702(c)(2), Income Tax Regs., conflicts with
sec. 6501(e)(1)(A)(i) and (ii) because under the latter section “gross
income” is specially defined and if a partnership return is filed the
entire amount of such “gross income” allocable to a partner is deemed
reported on the return. We do not think the gross income referred to in
sec. 702(c) is the equivalent of the “gross income” defined under sec.
6501(e)(1)(A).
In affirming our determination and agreeing with our
analysis, the Court of Appeals took the occasion to state
agreement with our comment on section 702(c), as follows (537
F.2d at 705 n.9):
We further note that we share the tax court’s opinion that
the example in Treas. Reg. � 1.702-1(c) appears to conflict
with � 6501(e)(1)(A)(ii)’s method for determining the amount
“omitted” from gross income when a partnership return has
been filed.
We conclude that one pattern that emerges from our prior
opinions dealing with the denominator in the 25-percent
calculation, is relevant to the limited matter now before us. In
dealing with documents that were not physically attached to the
taxpayer’s tax return, we have consistently12 drawn a line
between (1) documents that have been filed as tax returns of
12In Switzer v. Commissioner, 20 T.C. 759, 767-768 (1953),
we pointed to computational anomalies that might result from
applying this approach to partnerships, and there declined to so
apply this approach. However, on appeal the Commissioner joined
the taxpayers to persuade the Court of Appeals to order us to
vacate our decisions and enter decisions for the taxpayers.
After we complied with the Court of Appeals’ order in the Switzer
dockets, we recognized that the Commissioner had, in effect,
conceded error in Switzer’s statute of limitations rulings and
meant to apply that concession generally. See Rose v.
Commissioner, 24 T.C. 755, 768-769 (1955). In Rose, we merely
distinguished Switzer but did not formally overrule it. See 24
T.C. at 769. However, since that time, we have not followed
Switzer on this point. In the instant cases, neither side cites
Switzer. Clearly, Switzer has been sapped of its vitality.
Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 NextLast modified: May 25, 2011