Frank H. and Marla C. Black - Page 17

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          1.  Period of Limitations and Fraud                                         
               We address the issues of fraud and the period of limitations           
          prior to the other issues in the instant case because, absent               
          fraud, the period of limitations prevents respondent’s assessment           
          of the taxable years in issue.  Sec. 6501(c)(1); see, e.g.                  
          Langworthy v. Commissioner, T.C. Memo. 1998-218.  The notice of             
          deficiency was issued on June 9, 2004, after the expiration of              
          the general 3-year period of limitations on assessments for both            
          petitioners’ 1991 and 1992 taxable years.  Sec. 6501(a).                    
          However, in the case of the filing of a false or fraudulent                 
          return with intent to evade tax, the tax may be assessed at any             
          time.  Sec. 6501(c)(1).  If the return is fraudulent in any                 
          respect, it deprives the taxpayer of the bar of the statute of              
          limitations for that year.  Lowy v. Commissioner, 288 F.2d 517,             
          520 (2d Cir. 1961), affg. T.C. Memo. 1960-32.  “Thus, where fraud           
          is alleged and proven, respondent is free to determine a                    
          deficiency with respect to all items for the particular taxable             
          year without regard to the period of limitations.”  Colestock v.            
          Commissioner, 102 T.C. 380, 385 (1994).  Moreover, if a joint               
          return was filed, proof of the fraudulent intent as to one spouse           
          lifts the bar of the statute of limitations as to both spouses.             
          Vannaman v. Commissioner, 54 T.C. 1011, 1018 (1970).                        

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