Opinion ID: 206582
Heading Depth: 1
Heading Rank: 9

Heading: Application of the New Regulations to Grapevine

Text: We therefore conclude that the Treasury Regulations are new controlling authority that may change the Court of Federal Claims' judgment. Because there are no questions of material fact, our last task is to determine whether either Grapevine or the government is entitled to summary judgment as to the FPAA's timeliness. The Regulations state that the term gross income, as used in the limitations statutes, has two possible meanings depending on whether the income in question is from the sale of goods or services in a trade or business. Treas. Regs. §§ 301.6229(c)(2)-1 (a)(1)(ii)-(iii), 301.6501(e)-1 (a)(1)(ii)-(iii). Here, the understatement of income stemmed from the sale of the partnership, not a sale of goods or services in a trade or business, so the latter definition applies: (iii) For purposes of paragraph (a)(1)(i) of this section, the term gross income, as it relates to any income other than from the sale of goods or services in a trade or business, has the same meaning as provided under section 61(a), and includes the total of the amounts received or accrued, to the extent required to be shown on the return. In the case of amounts received or accrued that relate to the disposition of property, and except as provided in paragraph (a)(1)(ii) of this section, gross income means the excess of the amount realized from the disposition of the property over the unrecovered cost or other basis of the property. Consequently, except as provided in paragraph (a)(1)(ii) of this section, an understated amount of gross income resulting from an overstatement of unrecovered cost or other basis constitutes an omission from gross income for purposes of section 6229(c)(2). Treas. Reg. § 301.6229(c)(2)-1 (a)(1)(iii); see also id. § 301.6501(e)-1 (a)(1)(iii) (stating same with respect to I.R.C. § 6501(e)(1)(A)(i)). The regulation's effect is straightforward. It makes clear that Grapevine and the Tigues' overstatement of basis constitutes an omission from gross income for purposes of the limitations statutes. Applying that rule, we conclude that Grapevine and the Tigues' overstatement of basis triggered the extended limitations periods of § 6229(c)(2) and § 6501(e)(1)(A).