Supreme Court Decides United States v. Home Concrete & Supply
On April 25, 2012, the U.S. Supreme Court decided United States v. Home Concrete & Supply, LLC, No. 11-139, holding that when a taxpayer overstates the basis of sold property, the government must assess a deficiency within a three-year statutory period.
Respondent taxpayers filed tax returns in 2000 that overstated the basis of property they had sold. Because of the overstatement, their returns understated their gross income. The government issued a deficiency more than three years after the tax returns had been filed. The taxpayers asserted that the deficiency was barred by the three-year limitations period of 26 U.S.C. § 6501(a). The Commissioner responded that the deficiency was timely because when a taxpayer "omits from gross income an amount properly includable therein," the period for filing a deficiency is extended to six years. The Fourth Circuit held that the three-year limitations period applied to the respondents' tax returns.
The Supreme Court affirmed. The Court held the six-year limitations period does not apply when taxpayers overstate their basis in property that has been sold and thus understate the gain that they received from the sale. The Court declined to overrule its prior decision in Colony, Inc. v. Commissioner, 357 U.S. 28 (1958), where the Court had interpreted "identical" operative language to hold that taxpayer misstatements that overstated the basis in property did not fall within the scope of the six-year limitations provision. The Court rejected the government's arguments that language in other statutory provisions and a Treasury Regulation that was promulgated in 2010 demanded a different result.
Justice Breyer delivered the Court's opinion except as to Part IV-C. Chief Justice Roberts and Justices Thomas and Alito joined Justice Breyer's opinion in full. Justice Scalia joined the opinion except as to Part IV-C and filed an opinion concurring in part and concurring in the judgment. Justice Kennedy filed a dissenting opinion, in which Justices Ginsburg, Sotomayor and Kagan joined.
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