- 17 -
10. Conclusion
We conclude that petitioners did not operate their tree farm
for profit in 1994 and 1995.1
C. Whether the Statute of Limitations Bars Assessment of Tax
for 1994 and 1995
Petitioners contend that the time to assess tax for 1994 and
1995 expired because the IRS had not made an assessment by June
30, 1999. We disagree. Generally, the Commissioner must assess
tax within 3 years after the due date of a timely filed return.
See sec. 6501(a). Respondent bears the burden of proving that an
exception to the 3-year limit on the time to assess tax applies
if, as here as to 1994, the notice of deficiency was mailed more
than 3 years after the filing date. See Farmers Feed Co. v.
Commissioner, 10 B.T.A. 1069, 1075-1076 (1928).
Petitioners timely filed joint Federal income tax returns
for 1994 and 1995. They signed a Form 872, Consent to Extend the
Time to Assess Tax, in November 1997, extending the period to
assess tax for 1994 to June 30, 1999. Respondent mailed a notice
of deficiency for 1994 and 1995 on June 23, 1998, which was prior
to the expiration of the periods to assess tax for petitioners
for 1994 and 1995.
1 Because of our holding, we need not decide whether
petitioners must capitalize expenditures for improvements to land
and buildings with a useful life beyond the years in issue.
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