If you have a barred refund due to a Statute of Limitations rule, your client can still have a chance to get a refund under mitigation rules. In order to get the refund, the client must meet all four criteria in IRC 1312:
1. There was an error in a closed tax year
2. There is a determination in a non-closed tax year
3. The determination is due to a circumstance described in 1312.
4. There must be an inconsistent position
The IRS released Chief Counsel Advice 201622032. In the advice, the IRS looks at whether a stipulated decision in Tax Court is a determination for the purposes of the mitigation rules.
Under 1312(7)(a), "The determination determines the basis of property, and in respect of any transaction on which such basis depends, or in respect of any transaction which was erroneously treated as affecting such basis, there occurred, with respect to a taxpayer described in subparagraph (B) of this paragraph, any of the errors described in subparagraph (C) of this paragraph."
The IRS theory was that the settlement negotiations determined the basis of the asset, not the actual facts of what the basis should be. So, while the settlement appears to be a determination in form, it is was substantively not a determination.
Sometime next week, we will go into a more detailed discussion on mitigation.
Relevant Cites:
Forbes Article on Topic
IRC 1312
No comments:
Post a Comment