Question

In each of the following situations, state whether the statute of limitations on assessment is suspended: a. the taxpayer files a petition in Tax Court to litigate the deficiency in tax proposed by the IRS. b. The taxpayer files a petition in bankruptcy with the federal bankruptcy court.

Answer 1

A) Yes, if the taxpayer files a petition in tax court to litigate the deficiency in tax proposed by the IRS than statute of limitation is suspended.

Explanation:

If the taxpayer petition the tax court the statute of limitation on assessment is suspended until the decision of the tax court becomes final and for sixty days thereafter.

After the mailing of the notice of deficiency the IRS is not allowed to make assessment for ninty days. During this period the statute of limitation is suspended as per IRC S6503(a)(1).

B) No, in this case the statute of limitation on assessment will not be suspended.

Explanation:

If petition has been filed ,the tax court must be notified and the preceedings are stayed but the assessment statute is not stayed by bankruptcy.If the 3 year assessment period expires while the taxpayer is in bankruptcy, additional assessment are barred.

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