Missing Form 5471 kept the assessment period open

Plain-English summary

Chief Counsel addressed the limitations period when a taxpayer failed to file Form 5471 before the HIRE Act amended § 6501(c)(8). The pre-HIRE rule had kept the limitations period open for the entire return, so the amended rule continued to apply because the period was still open when the Act was enacted. If the taxpayer later filed the form and established reasonable cause, the period would run for three years from that filing and would remain open only for items related to the late information return. Any other provision producing a longer assessment period would still control.

Ruling snapshot

• Question: How did the HIRE Act amendment affect an assessment period already held open by a missing Form 5471?
• Outcome: Advice given. The period remained open for the whole return, subject to possible narrowing after a reasonable-cause filing.
• Key authorities: IRC §§ 6501(c)(3), 6501(c)(8), 6501(e); HIRE Act of 2010

Full text (IRS public release)

ID: CCA_2014072215170007 [Third Party Communication:

UILC: 6501.04-03 Date of Communication: Month DD, YYYY]

Number: 201432020
Release Date: 8/8/2014
From:
Sent: Tuesday, July 22, 2014 3:17:00 PM
To:
Cc:
Bcc:
Subject: 6501(c)(8)

I understand you have a question about 6501(c)(8) as it relates to one of your cases. I
hope this clarifies things for you.

In your case, section 6501(a)’s period of limitations would have expired in prior to the
effective date of the HIRE Act. Section 6501(c)(8), however, prior to the HIRE Act
would have kept the statute open as to the entire return due to the taxpayer’s failure to
file the Form 5471. When the HIRE Act comes in in 2010, amending slightly section
6501(c)(8), the effective date provision of the Act provides that the HIRE Act (2010)
version of 6501(c)(8) applies to returns filed after the effective date (not our case)
AND, returns filed before the effective date (our case) if the section 6501 statute of
limitations was still open as of the date of the enactment of HIRE Act. Given that the
period of limitations was open on the whole return under the pre-HIRE version of the
6501(c)(8) at the time of the enactment of HIRE Act, it remains open under HIRE act as
to the whole return.

If the taxpayer files the missing 5471, however, and establishes that it had reasonable
cause for the late filing of the form, then the statute of limitations under section
6501(C)(8) would be open for a period of three years from the date of the filing of the
form, but the assessment period would only be open as to the items related to the late-
filed information return pursuant to 6501(c)(8)(B).

If any other provision of section 6501 keeps the assessment period open for a longer
period of time (such as 6501(e) or (c)(3)) then we would rely on the longest assessment
period possible.

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Internal Revenue Service
Office of Chief Counsel
1111 Constitution Ave., NW
Washington, DC 20224