The Colony, Inc. v. Commissioner of Internal Revenue

The sole question on this review is whether the five-year statute of limitations contained in section 275(c) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 275(c) was applicable, in this case, as the Tax Court held. 1

The petitioner is a corporation dealing in real estate. Its income tax returns for the years in question contained understatements of gross income of more than twenty-five per cent resulting from an erroneous overstatement of the basis 'of land sold, rather than from any omission of gross receipts. Under these circumstances it is the petitioner’s contention that the general three-year limitation pé’riód of section 275(a) of the 1939 'Code- is applicable. As petitioner’s counsel correctly points out, the decisions of 'the Courts of Appeals of several other "circuits give clear support to this view. Uptegrove Lumber Co. v. Commissioner, 3 Cir., 1953, 204 F.2d 570; Deakman-Wells Co. v. Commissioner, 3 Cir., 1954, 213 F.2d 894; Goodenow v. Commissioner, 8 Cir., 1956, 238 F.2d 20; cf. Slaff v. Commissioner, 9 Cir., 1955, 220 F.2d 65; Davis v. Hightower, 5 Cir., 1956, 230 F.2d 549.

The reasoning of these cases is not without considerable persuasive force, and if the question were here for the first time, we might be disposed to follow them. However, the question has already been decided by this court in Reis v. Commissioner, 6 Cir., 1944, 142 F.2d 900, where it was held that the five-year limitation was applicable when the taxpayer’s understatement of gross income of inoré than twenty-five per cent was the result of his overstatement of the cost basis of property sold. The facts in the !Reis, case. ar.e, of course, not identical with the facts in the present case, but the issue presented is the same.

‘ Upon the authority of Reis v. Commissioner. the decision of the Tax Court is affirmed.