This is an appeal from the judgment of the United States District Court for the Northern District of Florida. 1 In a civil action for the refund of individual income taxes for the year 1961, the district court found that the three-year period of limitations was applicable, and entered judgment fоr the taxpayers. The United States appeals, arguing that the six-year period of limitations is applicable to this suit.
Taxpayеrs filed a timely personal joint federal income tax return for the year 1961 disclosing gross income in the amount of $5,093.36. That return disclosed income derived solely from wages for teaching services performed by taxpayers. Carolyn Taylor, one of the taxpayers, owned twenty-five per cent of the capital stock of J. O. Huxford Estate, Inc., a closely held corporation. The corрorate fiscal year ended the last day of February each year. On March 1, 1961, the corporation became an elеcting small business corporation under Sub-chapter “S” of the Internal Revenue Code of 1954. During the fiscal year ended February 28, 1962, the cоrporation derived income in the amount of $100,000, and that income was reported by the corporation on its Subchapter “S” information return for the fiscal year ending February 28, 1962. Distributions totalling $18,000 were made to Carolyn Taylor by the corporation in March and September of 1961. Because of the taxpayers’ mistaken belief that the distributions were not reportable as gross income in 1961 on their jоint personal federal income tax return, there was no reference to the 1961 distributions contained thereon. There was no reference made to the Subchapter “S” corporation in taxpayers’ individual return, nor on any schedule contained therein.
On December 8, 1966, the Internal Revenue Service issued a statutory notice of deficiency of income taxes for the year 1961 based on its determination that the distribution to Carolyn Taylor in 1961 constituted additional unreported income. Thereafter, the tax deficiency was formally assessed on March 31, 1967, more than three years, but less than six years, after the taxpayer’s 1961 federal income tax return was filed.
*993 The issue presented is whether the period of limitations within which the Government may assess a tax deficiency was extended from three to six years because of taxpayers’ failure to report or adequately disclose an item of gross income, admittedly taxable in 1961, on their federal income tax return for the year 1961.
As a general rule, subject to specific statutory exceptions, the period of limitations within which the Government may assess a tax deficiency is three years. Section 6501(a), Internal Revenue Code of 1954. One such exception to this general rule is section 6501(e) (1) (A), which provides an extension to six years for the period within which a tax deficiency may be assessed if the taxpayer has omitted an amount from gross income that exceeds twenty-five per сent of the gross income stated in his return. The taxpayers argue that the six-year statute of limitations is inapplicable, relying on seсtion 6501(e) (1) (A) (ii), which states:
In determining the amount omitted from gross income, there shall not be ■taken into account any amount which is omitted frоm gross income stated in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate tо apprise the Secretary or his delegate of the nature and amount of such item.
Thus we must determine whether taxpayers madе a disclosure of the omitted income sufficiently adequate to put the Government on notice of the nature and amount of thе omission.
As previously stated, taxpayers’ 1961 tax return contained no reference to Carolyn Taylor’s income from the Subchapter “S” corporation. Furthermore, there was no reference made to the Subchapter “S” corporation in taxpаyers’ individual return, nor on any schedule contained therein or any statement attached thereto. Under these circumstances, the Government, by examination of taxpayers’ individual return, was given no indication of the possible existence, the nature, or the amоunt of the omitted item nor was it referred to any other source of such information.
In enacting section 6501(e) (1) (A), Congress intended to give thе Government additional time to investigate tax returns in those cases where a taxpayer’s failure to report a taxable item puts the Government at a special disadvantage to discover the omission in the usual three-year period. Colony, Inc. v. Commissiоner of Internal Revenue, 1958,
Taxpayers tаke the position that the information necessary to a proper determination of their tax liability was contained in the Subchapter “S” return of J. O. Huxford Estate, Inc., and therefore a sufficient disclosure was made. The obvious flaw in that argument is that taxpayers’ individual return made no reference whatsoever to the existence of the Subchapter “S” corporation, or its tax return. Thus Benderоff v. United States, 8th Cir. 1968,
Since the Government in this case examined an individual income tax return giving no suggestion or inference thаt relevant information may have been contained elsewhere, it cannot be seriously contended that the “adequate disclosure” referred to in section 6501(e) (1) (A) (ii) was made. Therefore, the six-year period of limitations was applicable in this situation.
Reversed and remanded.
Notes
. Pursuant to Rule 18 of the Rules of this Court, we have concluded on the merits that this case is of such character as not to justify oral argument and have directed the Clerk to place the case on the Summary Calendar and to notify the parties in writing.
See
Murphy v. Houma Well Service, 5th Cir. 1969,