-9-
include fictitious expenses whether the fraud was committed by
the taxpayer or the taxpayer’s preparer. To find otherwise would
allow a taxpayer to receive the benefit of a fraudulent return by
hiding behind the preparer. Taxpayers whose returns are
fraudulent owing to fraud committed by the preparers would escape
their tax liability if the Commissioner were unable to identify
or investigate the fraud within the normal 3-year period.
We finally note that respondent is seeking to collect only
the deficiency in tax from petitioner. Respondent is not
asserting the fraud penalty against petitioner. Petitioner is
therefore required to pay only the correct amount of tax plus
statutory interest and no more.
Conclusion
We conclude that the limitations period for assessment is
extended under section 6501(c)(1) if the return is fraudulent,
even though it was the preparer rather than petitioner who had
the intent to evade tax. The plain meaning of the statute
indicates that it is the fraudulent nature of the return that
extends the limitations period. We therefore find that the
limitations period for assessing tax against petitioner is
extended indefinitely.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011