Prepare a Tax Research Memo given the following information:

ABC Corporation filed its 2011 federal income tax return on September 15, 2012

On that return, it reported gross income of $100,000. Included in that amount was $5,000 of gain related to the sale of an asset. The asset sold for $50,000. Per the taxpayer, the assets basis was $45,000. Upon examination by the IRS, it was determined the assets basis was only $19,000. Therefore, the gain should have been $31,000 and gross income on the 2008 return was understated by $26,000.

Furthermore, it was determined that $2,000 of rental income was also omitted from the gross income amount shown on the return bringing the total understatement of gross income for the year to $28,000. ABC did not disclose either of these items on its return, or in a statement attached to the return.

Can the IRS assess tax on these errors (i.e., when does the statute of limitations on assessment expire for 2011)? Does Code Sec. 6501(e) apply in this situation?

Be sure to demonstrate the research skills you have learned. You must cite the relevant code section(s) and at least one court case.

The format for this tax memo is as follows:

Subject

Facts

Conclusion

Analysis

Code section xx(a) contains.....It states.......Reg. sec. clarifies.....Rev Ruling.....Court case XXX vs. XXXX holds that.....