Jake, an individual calendar year taxpayer, incurred the following transactions.
Assuming that any error in timely reporting these amounts was inadvertent, how much omission from gross income would be required before the six-year statute of limitations would apply?

Question

Jake, an individual calendar year taxpayer, incurred the following transactions. 
Assuming that any error in timely reporting these amounts was inadvertent, how much omission from gross income would be required before the six-year statute of limitations would apply?

Quizplus · Accepted Answer

The six-year statute of limitations applies to any omission of gross income in excess of 25% of the gross income reported on the tax return. If we add up all of the transactions listed, the total amount of income is $230,000. Therefore, an omission of more than $57,500 ($230,000 x 0.25) would trigger the six-year statute of limitations. Choice C is the only option that meets this criteria.

Jake, an Individual Calendar Year Taxpayer, Incurred the Following Transactions