566 U.S. 478 (2012), 11-139, United States v. Home Concrete & Supply, LLC

Docket Nº:11-139
Citation:566 U.S. 478, 132 S.Ct. 1836, 182 L.Ed.2d 746, 80 U.S.L.W. 4347, 23 Fla.L.Weekly Fed. S 284
Opinion Judge:Breyer, Justice
Party Name:UNITED STATES, Petitioner v. HOME CONCRETE & SUPPLY, LLC, et al
Attorney:Malcolm L. Stewart, argued the cause for petitioner. Gregory G. Garre, argued the cause for respondents.
Judge Panel:Breyer, J., delivered the opinion of the Court, except as to Part IV-C. Roberts, C. J., and Thomas and Alito, JJ., joined that opinion in full, and Scalia, J., joined except as to Part IV-C. Scalia, J., filed an opinion concurring in part and concurring in the judgment, post, p. ___. Kennedy, J.,...
Case Date:April 25, 2012
Court:United States Supreme Court
 
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Page 478

566 U.S. 478 (2012)

132 S.Ct. 1836, 182 L.Ed.2d 746, 80 U.S.L.W. 4347, 23 Fla.L.Weekly Fed. S 284

UNITED STATES, Petitioner

v.

HOME CONCRETE & SUPPLY, LLC, et al

No. 11-139

United States Supreme Court

April 25, 2012

Argued January 17, 2012

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT.

SYLLABUS

[132 S.Ct. 1837] Ordinarily, the Government must assess a deficiency against a taxpayer within " 3 years after the return was filed," 26 U.S.C. § 6501(a), but that [182 L.Ed.2d 749] period is extended to 6 years when a taxpayer " omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return," § 6501(e)(1)(A). Respondent [132 S.Ct. 1838] taxpayers overstated the basis of certain property that they had sold. As a result, their returns understated the gross income they received from the sale by an amount in excess of 25%. The Commissioner asserted the deficiency outside the 3-year limitations period but within the 6-year period. The Fourth Circuit concluded that the taxpayers' overstatements of basis, and resulting understatements of gross income, did not trigger the extended limitations period.

Held: The judgment is affirmed.

634 F.3d 249, affirmed.

Justice Breyer delivered the opinion of the Court, except as to Part IV-C, concluding that § 6501(e)(1)(A) does not apply to an overstatement of basis. Pp. ___ - ___, 182 L.Ed.2d, at 750-754.

(a) In Colony, Inc. v. Commissioner, 357 U.S. 28, 78 S.Ct. 1033, 2 L.Ed.2d 1119, 1958-2 C.B. 1005the Court interpreted a provision of the Internal Revenue Code of 1939 containing language materially indistinguishable from the language at issue here, holding that taxpayer misstatements that overstate the basis in property do not fall within the statute's scope. The Court recognized that such an overstatement wrongly understates a taxpayer's income, but concluded that the phrase " omits . . . an amount" limited the statute's scope to situations in which specific receipts are left out of the computation of gross income. The Court also noted that while the statute's language was not " unambiguous," id., at 33, 78 S.Ct. 1033, 2 L.Ed.2d 1119, the statutory history showed that Congress intended to restrict the extended limitations period to situations that did not include overstatements of basis. Finally, the Court found its conclusion " in harmony with the unambiguous language of § 6501(e)(1)(A)," id., at 37, 78 S.Ct. 1033, 2 L.Ed.2d 1119, the provision enacted as part of the Internal Revenue Code of 1954 and applicable here. Pp. ___ - ___, 182 L.Ed.2d, at 750-752.

(b) Colony determines the outcome of this case. The operative language of the 1939 provision and the provision at issue is identical. It

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would be difficult to give the same language here a different interpretation without overruling Colony, a course of action stare decisis counsels against. John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 139, 128 S.Ct. 750, 169 L.Ed.2d 591. The Government suggests that differences in other nearby parts of the 1954 Code favor a different interpretation than the one adopted in Colony. However, its arguments are too fragile to bear the significant weight it seeks to place upon them. Pp. ___ - ___, 182 L.Ed.2d, at 752-753.

(c) The Court also rejects the Government's argument that a recently promulgated Treasury Regulation interpreting the statute's operative language in its favor should be granted deference under Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694. See National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967, 982, 125 S.Ct. 2688, 162 L.Ed.2d 820. Colony has already interpreted the statute, and there is no longer any different construction that is [182 L.Ed.2d 750] consistent with Colony and available for adoption by the agency. Pp. ___ - ___, 182 L.Ed.2d, at 753-754.

Malcolm L. Stewart, argued the cause for petitioner.

Gregory G. Garre, argued the cause for respondents.

Breyer, J., delivered the opinion of the Court, except as to Part IV-C. Roberts, C. J., and Thomas and Alito, JJ., joined that opinion in full, and Scalia, J., joined except as to Part IV-C. Scalia, J., filed an opinion concurring in part and concurring in the judgment, post, p. ___. Kennedy, J., filed a dissenting opinion, in which Ginsburg, Sotomayor, and Kagan, JJ., joined, post, p. ___.

OPINION

Page 480

[132 S.Ct. 1839] Breyer, Justice

Ordinarily, the Government must assess a deficiency against a taxpayer within " 3 years after the return was filed." 26 U.S.C. § 6501(a) (2000 ed.). The 3-year period is extended to 6 years, however, when a taxpayer " omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return." § 6501(e)(1)(A) (emphasis added). The question before us is whether this latter provision applies (and extends the ordinary 3-year limitations period) when the taxpayer overstates his basis in property that he has sold, thereby understating the gain that he received from its sale. Following Colony, Inc. v. Commissioner, 357 U.S. 28, 78 S.Ct. 1033, 2 L.Ed.2d 1119, 1958-2 C.B. 1005 (1958), we hold that the provision does not apply to an overstatement of basis. Hence the 6-year period does not apply.

I

For present purposes the relevant underlying circumstances are not in dispute. We consequently assume that (1) the respondent taxpayers filed their relevant tax returns in April 2000; (2) the returns overstated the basis of certain property that the taxpayers had sold; (3) as a result the returns understated the gross income that the taxpayers received from the sale of the property; and (4) the understatement exceeded the statute's 25% threshold. We also take as undisputed that the Commissioner asserted the relevant deficiency within the extended 6-year limitations period, but

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outside the default 3-year period. Thus, unless the 6-year statute of limitations applies, the Government's efforts to assert a tax deficiency came too late. Our conclusion--that the extended limitations period does not apply--follows directly from this Court's earlier decision in Colony.

II

In Colony this Court interpreted a provision of the Internal Revenue Code of 1939, the operative language of which is identical to the language now before us. The Commissioner there had determined " that the taxpayer had understated the gross profits on the sales of certain lots of land for residential purposes as a result of having overstated the 'basis' of such lots by erroneously including in their cost certain unallowable items of development expense." Id., at 30, 78 S.Ct. 1033, 2 L.Ed.2d 1119.

The Commissioner's assessment came after the ordinary 3-year limitations period had run. And, it was consequently timely only if the taxpayer, in the words of the [132 S.Ct. 1840] 1939 Code, had " omit[ted] from gross income an [182 L.Ed.2d 751] amount properly includible therein which is in excess of 25 per centum of the amount of gross income stated in the return . . . ." 26 U.S.C. § 275(c) (1940 ed.). The Code provision applicable to this case, adopted in 1954, contains materially indistinguishable language. See § 6501(e)(1)(A) (2000 ed.) (same, but replacing " per centum" with " percent" ). See also Appendix, infra.

In Colony this Court held that taxpayer misstatements, overstating the basis in property, do not fall within the scope of the statute. But the Court recognized the Commissioner's contrary argument for inclusion. 357 U.S., at 32, 78 S.Ct. 1033, 2 L.Ed.2d 1119. Then as now, the Code itself defined " gross income" in this context as the difference between gross revenue (often the amount the taxpayer received upon selling the property) and basis (often the amount the taxpayer paid for the property). Compare 26 U.S.C. § § 22, 111 (1940 ed.) with § § 61(a)(3),

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1001(a) (2000 ed.). And, the Commissioner pointed out, an overstatement of basis can diminish the " amount" of the gain just as leaving the item entirely off the return might do. 357 U.S., at 32, 78 S.Ct. 1033, 2 L.Ed.2d 1119. Either way, the error wrongly understates the taxpayer's income.

But, the Court added, the Commissioner's argument did not fully account for the provision's language, in particular the word " omit." The key phrase says " omits. . . an amount." The word " omits" (unlike, say, " reduces" or " understates" ) means " '[t]o leave out or unmentioned; not to insert, include, or name.' " Ibid. (quoting Webster's New International Dictionary (2d ed. 1939)). Thus, taken literally, " omit" limits the...

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