The Usual Three-Year Statute of Limitations on Additional Tax Assessments

question 72

Multiple Choice

The usual three-year statute of limitations on additional tax assessments applies in the following situation(s) .

• A) No return at all is filed.
• B) An investment in a marketable security is worthless.
• C) Taxpayer discovers an inadvertent overstatement of deductions equal to 30% of gross income.
• D) Taxpayer inadvertently omits an amount of gross income equal to 30% of the gross income stated on the return.

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Definitions:

Accounts Payable

Accounts Payable represents short-term financial obligations owed by a business to its suppliers or creditors for goods and services received.

Perpetual Inventory System

An inventory management method that continuously updates the balance of merchandise by recording each sales and purchase transaction.

Inventory Account

An asset account on the balance sheet that reports the value of a company's inventory, which includes goods that are in the process of being produced for sale and finished goods.

Perpetual Inventory System

A method of continuously tracking inventory levels, costs, and sales in real time, reducing the need for physical inventories.