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omitted income, the return should provide respondent with a
“‘clue’ to the existence of the error.” Quick Trust v.
Commissioner, 54 T.C. 1336, 1347 (1970), affd. 444 F.2d 90 (8th
Cir. 1971). Respondent bears the burden of proving that the 6-
year period for assessment applies. Bardwell v. Commissioner, 38
T.C. 84, 92 (1962), affd. 318 F.2d 786 (10th Cir. 1963).
The Gouveias assert that the Pago and McKenzie Trusts’ Forms
1041 and attached Schedules K-1 must be considered along with the
Gouveias’ individual income tax returns. When read together, the
Gouveias argue, their returns and the trusts’ returns provided
adequate disclosure of the nature and amount of the omitted items
of income. Therefore, the Gouveias argue, assessment of
deficiencies for 1995 and 1996 is barred by the 3-year statute of
limitations.
Respondent argues that the 6-year period of limitations of
section 6501(e) applies to the Gouveias’ 1995 and 1996 taxable
years because the amount of gross income the Gouveias failed to
report from the Pago and McKenzie Trusts exceeded 25 percent of
the amount of gross income stated on the Gouveias’ returns.
Respondent further argues that the Gouveias’ tax returns did not
adequately disclose the nature and amount of omitted income
attributable to the McKenzie Trust and that the income from the
McKenzie Trust alone exceeds 25 percent of the gross income the
Gouveias reported.
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