In applying the six-year statute of limitations to taxpayers who overstated their basis in sold assets, the IRS recently experienced mixed results in the courts. In an attempt to get all the courts on the same page, the IRS issued new regulations effective September 24, 2009.

Under the new regulations, the IRS clarifies its stance that an understatement of gross income includes the understatement of gain from the sale of an asset when the basis of that asset is overstated.1

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