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$5,000 medical reimbursement to Martha Graham from State Farm
insurance.
Petitioner deposited $750,046 in his law firm's business
checking account during 1999, of which $140,558 was deposits from
a nontaxable source.
OPINION
A. Whether Distributable Shares Issued to Petitioners’ Children
by the Anis Partnership Are Taxable to Petitioners
1. Statute of Limitations
Respondent assessed tax relating to the Anis partnership
more than 3 years after petitioners filed their 1995 return.
Petitioners contend that assessment of tax on that amount of
income is barred by the statute of limitations.
We disagree. Generally, the Commissioner must assess tax
within 3 years after the date of filing of the return. Sec.
6501(a). However, the 3-year limit does not apply if the
underpayment was due to fraud. Sec. 6501(c)(1). That is the
case here. See paragraph D-3-a, below. Thus, the statute of
limitations does not bar assessment of tax on the amounts at
issue distributed from Smith’s client trust account and the fair
market value of a 22.375-percent interest in the property of the
Anis partnership.
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