Basis overstatement counts as omission from gross income

Plain-English summary

Chief Counsel explained that Congress amended section 6501(e)(1) in 2015 to address overstated basis. An understatement of gross income caused by overstating unrecovered cost or other basis is treated as an omission from gross income. The rule applies even when the basis overstatement does not concern a sold asset.

Ruling snapshot

• Question: Does an overstatement of basis count as an omission from gross income under section 6501(e)(1) if it does not concern a sold asset?
• Outcome: advice given
• Key authorities: IRC § 6501(e)(1); Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

Full text (IRS public release)

ID: CCA_2016112115175147
UILC: 6501.00-00

Number: 201652022
Release Date: 12/23/2016
From:
Sent: Sun 10/30/2016 11:10 PM
To:
Cc:
Bcc:
Subject: 6501 issue

Drew,

In regard to your question about overstated basis and section 6501(e): Congress
amended section 6501(e)(1) in the Surface Transportation and Veterans Health Care
Choice Improvement Act of 2015 (H.R. 3236; Pub. Law No. 114-41) to provide that an
understatement of gross income by reason of an overstatement of unrecovered cost or
other basis is an omission from gross income. This applies even if the overstatement of
basis is not in regard to a “sold asset.”

Please let me know if I may be of any further assistance.

Yours,

Elie