Statute of Limitations Question

[RWG1950]

I have a taxpayer that I've been preparing returns for, for more than 10 years. He got married in 2015 & has filed MFJ since then.
His new wife's father apparently had died in 2014. She inherited 1/2 of his IRA (stretched) and 1/2 of his personal residence with her brother.
She sold her 1/2 of the house to her brother in 2019. When questioning her about the house sale details, she also disclosed that back in 2015
and possibly 2016, she had received payments from her dad's business (his 6 partners bought her dad's share out) that totaled nearly 50K.
This was news to me. I looked back on the tax organizer they completed & signed for me for those years - but no such income had been disclosed.
Apparently the Dad's business had held life insurance on the partners or shareholders & this was used to buy her interest out.
Normally life insurance death benefits are tax free but if the business was the policy owner & beneficiary, I'm thinking this may have been taxable income to her.
Their income in 2015, 2016 & 2017 averaged about 50-60 K yearly. If the buyout proceeds were taxable income, the normal statute of limitations may not apply due to understatement.
What do my fellow preparers think the best course of action (if any) in this instance would be ? Thanks for comments

[TaxGuyBill]

No experience with this, but just a few thoughts:

Dad's Partnership interest would have received a step-up in value when he died, right? So assuming other other partners paid fair market value and bought out shortly after death, there really wouldn't be a gain, right?

I didn't quite follow the life insurance stuff. If the beneficiary was the Partnership (or other partners), then wouldn't the taxability be on the Partnership level (or the other partners)? Any taxable proceeds would have gone to the Estate or beneficiary via the K-1. If the client was the direct beneficiary, I don't see it being taxable.

[RWG1950]

Hadn't thought of it this way.
Thanks Bill