Statute of Limitations for Taxes

The sole owner of an S corporation had tax deficiencies of about $3 million, but he argued that the IRS assessment was time-barred by the statute of limitations. The Tax Court said that the period for assessing taxes against an S corporation shareholder for income attributable to transactions of an S corporation runs with respect to the shareholder’s tax return, and not the S corporation’s return; the assessment wasn’t time-barred. The “relevant return” was the shareholder’s Form 1040, and not the corporation’s Form 1120S.