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the shareholder’s liability is not “based on” the underlying tax
liability of the corporation as is an assessment against a
responsible person under section 6672. Therefore, the
corporation’s return does not commence the section 6501 period of
assessment applicable to the dividend income received by the
shareholders.
Finally, adoption of a rule that the assessment period is
controlled by the return of the taxpayer against whom an
assessment may be made is a functional solution to the question
posed by the parties. That approach satisfies the need for
administrative economy and the goal of finality inherent in
section 6501(a). It is also in accord with the legislative
history to the post-1997 changes to section 6501(a). A
shareholder-level period for assessment relieves administrative
burdens and the difficulty taxpayers could encounter in not
knowing whether the return of another taxpayer might bear on the
period of limitations.12 Ratto v. Commissioner, 20 T.C. 785, 789-
790 (1953); Masterson v. Commissioner, 1 T.C. 315, 324 (1942),
revd. on other grounds 141 F.2d 391 (5th Cir. 1944). Uncertainty
12 To hold otherwise could result in situations where the
Commissioner would have less than the 3 years provided for in
sec. 6501(a) for a shareholder of a C corporation whose taxable
year ended earlier than the shareholder’s. It could also result
in a situation where a taxpayer’s exposure would be involuntarily
extended beyond the normal 3 year period, if the source entity
agreed to extend its assessment period for the parallel tax
period.
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