Code Section 6501(c)

Code Section Effective Date Name of Act Name of Provision
6501(c) * 3/18/2010 The Air Traffic Control Act Limitation on Extension of Statute of Limitations for Failure to Notify Secretary of Certain Foreign Transfers

* Notes on Effective Date

The provision is effective as if included in section 513 of the Hiring Incentives to Restore Employment Act.1286 Thus, the provision applies for returns filed after March 18, 2010, the date of enactment of that Act, as well as for any other return for which the assessment period specified in section 6501 had not yet expired as of that date.

Limitation on Extension of Statute of Limitations for Failure to Notify Secretary of Certain Foreign Transfers

Explanation of Provision

The provision modifies the scope of the exception to the limitations period if a failure to provide information on cross-border transactions or foreign assets is shown to be due to reasonable cause and not willful neglect. In the absence of reasonable cause or the presence of willful neglect, the suspension of the limitations period and the subsequent three-year period that begins after information is ultimately supplied apply to all issues with respect to the income tax return. In cases in which a taxpayer establishes reasonable cause, the limitations period is suspended only for the item or items related to the failure to disclose. To prove reasonable cause, it is anticipated that a taxpayer must establish that the failure was objectively reasonable (i.e., the existence of adequate measures to ensure compliance with rules and regulations), and in good faith.

For example, the limitations period for assessing taxes with respect to a tax return filed on March 31, 2011 ordinarily expires on March 31, 2014. In order to assess tax with respect to any issue on the return after March 31, 2014, the IRS must be able to establish that one of the exceptions applies. If the taxpayer fails to attach to that return one of multiple information returns required, the limitations period does not begin to run unless and until that missing information return is supplied. Assuming that the missing report is supplied to the IRS on January 1, 2013, the limitations period for the entire return begins, and elapses no earlier than three years later, on January 1, 2016. All items are subject to adjustment during that time, unless the taxpayer can prove that reasonable cause for the failure to file existed. If the taxpayer establishes
reasonable cause, the only adjustments to tax permitted after March 31, 2014 are those related to the failure to file the information return. For this purpose, related items include (1) adjustments made to the tax consequences claimed on the return with respect to the transaction that was the subject of the information return, (2) adjustments to any item to the extent the item is affected by the transaction even if it is otherwise unrelated to the transaction, and (3) interest and penalties that are related to the transaction or the adjustments made to the tax consequences.

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1286 Pub. L. No. 111–147.

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