Ezel / IRS Rulings / 202625022
Chief Counsel Advice 202625022 Released June 18, 2026 Advice

Whether adequately disclosed but omitted income counts in the § 6501(e) 25% denominator

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This is an internal IRS Chief Counsel email about the six-year statute of limitations in IRC § 6501(e)(1)(A). Normally the IRS has three years to assess tax, but that stretches to six years when a taxpayer leaves off more than 25% of the gross income stated on the return. To test the 25% threshold you build a fraction: omitted income (the numerator) over gross income stated on the return (the denominator). The statute says that income which was left out of the stated gross income but was still "adequately disclosed" somewhere on the return or an attachment does not count in the numerator (§ 6501(e)(1)(B)(iii)). The question here was whether those adequately disclosed items nonetheless get added to the denominator. Neither the statute nor Treas. Reg. § 301.6501(e)-1 answers this directly. The email reasons that because those items are by definition not part of the gross income stated in the return, and because the IRS's own computational workbook (referenced in IRM 25.1.4.4.9.1(9)) uses "income originally reported" as the denominator, the better reading is that adequately disclosed items are disregarded from both the numerator and the denominator. This is informal advice, not a ruling.

Ruling snapshot

  • Question: In the § 6501(e)(1) 25%-omission calculation, are adequately disclosed items (excluded from the numerator under § 6501(e)(1)(B)(iii)) added to the denominator?
  • Outcome: Advice given (no ruling or determination).
  • Key authorities: IRC § 6501(e)(1)(A), (A)(i), and (B)(iii); Treas. Reg. § 301.6501(e)-1; IRM 25.1.4.4.9.1(9).

Full text (IRS public release)

ID: CCA_2026040309242600
[Third Party Communication:
Date of Communication: Month DD, YYYY]

UILC: 6501.00-00

Number: 202625022
Release Date: 6/18/2026

From: ------------------
Sent: Friday, April 3, 2026 9:24:26 AM
To: ------------------------
Cc: ----------------------
Bcc:
Subject: RE: 6501(e) Question

Hi ------,

I hope this email finds you well! Pursuant to our conversation on Wednesday, below is our analysis of the IRC 6501(e) calculation issue. Please let me know if you have any questions. Thanks!

Issue:

For purposes of calculating the percent of gross income omitted under IRC 6501(e)(1), are items of income which are not stated in the return, but which are adequately disclosed under IRC 6501(e)(1)(B)(iii), added to the "denominator" of the equation?

Answer:

Section 6501(e)(1)(A) extends the period of limitations on assessment and collection to six years where a taxpayer has omitted an amount of income that exceeds "25 percent of the amount of gross income stated in the return." In calculating this percentage, IRC 6501(e)(1)(A) establishes that the numerator consists of omitted gross income, and IRC 6501(e)(1)(A)(i) establishes that the denominator consists of gross income stated in the return. Section 6501(e)(1)(B)(iii) states that for the purpose of determining the numerator, "there shall not be taken into account any amount which is omitted from gross income stated in the return" where that amount is adequately disclosed in the return or an attached statement. It is not directly addressed in the statute, or in Treas. Reg. 301.6501(e)–1, whether these omitted amounts are included in the denominator. However, as explained above, the denominator is the amount of gross income stated in the return. IRC 6501(e)(1)(A)(i). The category of adequately disclosed items to which subsection (B)(iii) applies is described in the statute as "any amount which is omitted from gross income stated in the return," and therefore by definition is NOT gross income stated in the return. Looking at the face of the statute therefore seems to suggest that not only are adequately disclosed (but otherwise omitted from gross income stated in the return) items not taken into account when calculating the numerator, but that they are also not taken into account when calculating the denominator.

The Internal Revenue Manual does not state directly how IRC 6501(e)(1)(B)(iii) is to be interpreted when calculating the denominator of the omission. There are some hints that the

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current practice is consistent with our reading above. For example, the computational workbook listed in IRM 25.1.4.4.9.1(9) for calculating the percentage of income omitted lists the denominator as "income originally reported." Given the lack of evidence that the IRS includes these disclosed but incorrectly reported items in the denominator as a matter of course, and the statutory language itself, the correct interpretation of IRC 6501(e)(1) is likely that items under IRC 6501(e)(1)(B)(iii) should be disregarded both for the numerator and the denominator.

Best wishes,