We have talked about the statute of limitations many times.
In general, the IRS has three years to challenge your tax return and assess additional taxes. Reverse the direction and you likewise have three years to request refund of a tax overpayment.
The intent is clear: at some point the back and forth must stop.
Mind you, if the IRS assesses additional tax within that period, then the three-year statute for assessment transmutes to a ten-year statute for collection.
There are exceptions to the three years, of course. Here are some exceptions from Section 6501(c):
Let’s do a little tax
practice today. Reread (c)(1) above. I have a question for you:
Must the intent to evade tax be the taxpayer’s?
On first impression, the answer appears to be “yes.” Who - other than the taxpayer - stands to benefit from filing a false or fraudulent return?
Let’s talk about Stephanie Murrin.
For years 1993 to 1999 the
Murrins used a tax preparer for their joint individual income tax return, as
well as two partnerships in which Ms. Murrin was a general partner. Unbeknownst
to the Murrins, the preparer placed false or fraudulent information on those
returns with the intent to evade tax.
Why? We are not told.
The Murrins were not aware of the preparer’s actions, nor did they intend to evade tax.
The IRS (somehow) caught up to this and in 2019 (twenty years later) issued a statutory of deficiency for the years at issue. The IRS argued that the years were still open under the statute of limitations pursuant to Section 6501(c).
Mr. Murrin died before the case went to Tax Court.
Mrs. Murrin ran into a formidable obstacle: stare decisis.
The Tax Court had previously decided (in Allen) that Section 6501(c) did not look solely at the taxpayer to find intent.
Mrs. Murrin argued that Allen was wrongly decided. She based her argument on a Federal Circuit Court decision (BASR) disagreeing with the Tax Court decision in Allen.
She had an argument.
The Tax Court noted that each judge in BASR wrote separately, meaning that it was unclear which interpretation of Section 6501(c) prevailed. When everyone has an opinion, there is no standard for precedence.
With that backdrop, the Tax Court stated:
The Federal Circuit’s position on the precise point before us is not clear. We further note that ‘there is no jurisdiction for appeal of any decision of the Tax Court to the [Federal Circuit]’ in any event. Stare decisis principles thus would seem to weigh against our reconsideration of our precedent in light of BASR.”
The Tax Court had two arguments to support its position:
- By its own terms, this provision does not restrict its application to cases where taxpayers personally had intent to evade tax. Instead, Congress showed itself agnostic as to who had to have the intent to evade tax, choosing to ‘key [the extension of the limitation period] to the fraudulent nature of the return’ rather than tie it to taxpayer intent.”
- There are other Code sections (which we will skip for our discussion) where Congress explicitly limited required intent to the taxpayer. The fact that it did not do so here is a tell that Congress did not mean to limit the meaning of “intent” for purposes of this Section.
Mrs. Murrin lost before the Tax Court.
She appealed to the Third Circuit, and I read last week that she lost there also.
Is it fair? My first reaction is no, as taxpayer is the tax return and vice versa. Who else can have a closer connection to that return that the person filing it? It seems to me that the judicial wordsmithing here is drivel and prattle. Still, I acknowledge the necessity and persuasion of stare decisis, although poor drafting of tax law and stare decisis is a bad brew for common sense.
Our case this time was Murrin v Commissioner, No 23-1234 (3rd Cir, August 18, 2025).
