T.C. Memo. 1999-121
UNITED STATES TAX COURT
RONALD W. STEWART, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23541-97. Filed April 12, 1999.
Ronald W. Stewart, pro se.
John R. Gilbert, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: Respondent determined deficiencies and
additions to tax in petitioner's Federal income tax as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1992 $30,790 $2,345 $305
1993 29,153 2,686 364
1994 23,117 1,061 111
1995 44,177 4,809 898
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Subsequent to the filing of his petition, petitioner filed
delinquent Federal income tax returns for each of the years 1992
through 1995, inclusive. Each of petitioner's returns was due on
or before April 15, following the close of the calendar year.
Sec. 6072(a).1 The returns for each of the years 1992 through
1994, inclusive, claim credit for tax withheld from petitioner's
wages and claim an overpayment of tax for those respective return
years. Respondent accepted each of the returns as filed. As a
consequence of respondent's accepting the returns for 1992
through 1995, assessing the tax reported on the returns, and
other concessions, petitioner overpaid tax for the years 1992,
1993, and 1994. In respondent's post trial memorandum, he
concedes an overpayment of $3,067 for 1992. The amount of the
overpayment ($3,067) is the sum of a $2,993 overpayment from 1996
and the $74 overpayment that petitioner claimed on his 1992
return.
The issues for decision are: (1) Whether petitioner's
overpayments of tax for the taxable years 1993 and 1994 are
either partially or fully time barred under sections 6511(b) and
6512, and (2) whether petitioner is liable for an addition to tax
under section 6651(a)(1) for the taxable year 1995.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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FINDINGS OF FACT
Petitioner resided in Laurel Springs, New Jersey, at the
time of filing his petition and amended petition with this Court.
After filing his petition in this case, petitioner filed
delinquent Federal income tax returns for each of the years in
issue. The returns for 1992, 1993, 1994, and 1995 are dated
January 15, 1998, January 31, 1998, February 7, 1998, and
February 23, 1998, respectively. No requests for extensions of
time to file were requested or granted.
Petitioner's 1992 and 1993 tax returns claim capital loss
carryover deductions emanating from a nonbusiness bad debt
incurred in 1990. The capital loss carryovers claimed in 1992
and 1993 are $3,000 and $788,2 respectively. Petitioner's tax
return for the 1994 year does not claim any capital loss
carryforward. Petitioner's tax returns show tax liabilities in
the following amounts:
Years
1993 1994 1995
Amount: $15,594 $15,787 $25,113
Petitioner had taxes withheld from his wages for each of the
years in issue. The amounts withheld for the years 1993 through
1995 are as follows:
2
All amounts have been rounded to the nearest dollar.
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Years
1993 1994 1995
Amount
withheld: $18,457 $18,875 $24,943
Respondent issued notices of deficiency for the years 1994
and 1995 on September 17, 1997, and for the year 1993 on October
1, 1997.
OPINION
Our jurisdiction to determine an overpayment and order a
refund is provided in section 6512.3 The Supreme Court has
3
Sec. 6512(b) provides in relevant part:
(1) Jurisdiction to determine.--Except as provided by
paragraph (3) and by section 7463, if the Tax Court finds
that there is no deficiency and further finds that the
taxpayer has made an overpayment of income tax for the same
taxable year * * * in respect of which the Secretary
determined the deficiency, or finds that there is a
deficiency but that the taxpayer has made an overpayment of
such tax, the Tax Court shall have jurisdiction to determine
the amount of such overpayment, and such amount shall, when
the decision of the Tax Court has become final, be credited
or refunded to the taxpayer.
* * * * * * *
(3) Limit on amount of credit or refund.--No such
credit or refund shall be allowed or made of any
portion of the tax unless the Tax Court determines as
part of its decision that such portion was paid--
(A) after the mailing of the notice of deficiency,
(B) within the period which would be applicable
under section 6511(b)(2), (c), or (d), if on the date
of the mailing of the notice of deficiency a claim had
been filed (whether or not filed) stating the grounds
upon which the Tax Court finds that there is an
overpayment, or
(C) within the period which would be applicable
under section 6511(b)(2), (c), or (d), in respect of
(continued...)
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recently interpreted this provision. In Commissioner v. Lundy,
516 U.S. 235 (1996), the Court stated:
The analysis dictated by section 6512(b)(3)(B) is
not elegant, but it is straightforward. * * * all that
matters for the proper application of section
6512(b)(3)(B) is that the "claim" contemplated in that
section be treated as the only mechanism for
determining whether a taxpayer can recover a refund.
Section 6512(b)(3)(B) defines the look-back period that
applies in Tax Court by incorporating the look-back
provisions from section 6511(b)(2), and directs the Tax
Court to determine the applicable period by inquiring
into the timeliness of a hypothetical claim for refund
filed "on the date of the mailing of the notice of
deficiency."
To this end, section 6512(b)(3)(B) directs the Tax
Court's attention to section 6511(b)(2), which in turn
instructs the court to apply either a 3-year or a 2-
year look-back period. See sections 6511(b)(2)(A) and
(B) (incorporating by reference section 6511(a)); * * *
To decide which of these look-back periods to apply,
the Tax Court must consult the filing provisions of
section 6511(a) and ask whether the claim described by
section 6512(b)(3)(B)--a claim filed "on the date of
the mailing of the notice of deficiency"--would be
filed "within 3 years from the time the return was
filed." See section 6511(b)(2)(A) (incorporating by
reference section 6511(a)). If a claim filed on the
date of the mailing of the notice of deficiency would
be filed within that 3-year period, then the look-back
3
(...continued)
any claim for refund filed within the applicable period
specified in section 6511 and before the date of the
mailing of the notice of deficiency--
(i) which had not been disallowed before that
date,
(ii) which had been disallowed before that
date and in respect of which a timely suit for
refund could have been commenced as of that date,
or
(iii) in respect of which a suit for refund
had been commenced before that date and within the
period specified in section 6532.
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period is also three years and the Tax Court has
jurisdiction to award a refund of any taxes paid within
three years prior to the date of the mailing of the
notice of deficiency. Secs. 6511(b)(2)(A) and
6512(b)(3)(B). If the claim would not be filed within
that 3-year period, then the period for awarding a
refund is only two years. Secs. 6511(b)(2)(B) and
6512(b)(3)(B).
In this case, we must determine which of these two
look-back periods to apply when the taxpayer fails to
file a tax return when it is due, and the Commissioner
mails the taxpayer a notice of deficiency before the
taxpayer gets around to filing a late return. * * *
We think the proper application of section
6512(b)(3)(B) * * * requires that a 2-year look-back
period be applied. [Commissioner v. Lundy, supra at
242-243.]
In 1993, petitioner had tax withheld from his wages in the
total amount of $18,457. This amount is deemed to have been paid
on April 15, 1994. Sec. 6513(a). Respondent has conceded that
petitioner's tax liability is $15,594, the amount shown by
petitioner on his 1993 return. This results in an overpayment of
$2,863. Most of this overpayment ($2,642) is time barred because
the date on which the notice of deficiency was mailed, the
hypothetical claim for refund, is more than 2 years from the date
(April 15, 1994) the tax was deemed paid. Secs. 6511(b)(2)(B),
6512, 6513(a); Commissioner v. Lundy, supra; Galuska v.
Commissioner, 5 F.3d 195 (7th Cir. 1993), affg. 98 T.C. 661
(1992); Allen v. Commissioner, 99 T.C. 475 (1992), affd. without
published opinion 23 F.3d 406 (6th Cir. 1994). The portion of
the claim attributable to a capital loss carryforward is not so
limited. The amount of carryforward claimed in petitioner's 1993
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return was $788. The statute of limitations on a capital loss
carryforward arising from a bad debt deduction is 7 years. Sec.
6511(d)(1). Petitioner was in the 28 percent marginal tax
bracket in 1993. The maximum portion of an overpayment
attributable to the capital loss carryforward ($788) would be
$221.4 Consequently, we hold that petitioner is entitled to a
refund for 1993 in the amount of $221.
For 1994, respondent concedes that petitioner's tax
liability is $15,787 as shown by petitioner on his delinquent
return and that petitioner had tax withheld from his wages in the
total amount of $18,875. This results in an overpayment of
$3,088. None of this amount is claimed to be related to a
capital loss carryforward. For the reasons stated above, the tax
withheld is deemed to have been paid on April 15, 1995, and the
hypothetical claim for refund was made on September 17, 1997.
The hypothetical claim for refund, having been made more than 2
years from the date the tax was deemed paid, is time barred by
virtue of sections 6511(b)(2)(B) and 6512. Commissioner v.
Lundy, supra; Galuska v. Commissioner, supra; Allen v.
Commissioner, supra.
4
The amount of the overpayment attributable to the capital
loss carryforward is the product of the full amount of the loss
carryforward times petitioner's marginal rate; i.e., $788 x .28 =
$221. Respondent agrees that petitioner is entitled to an
overpayment of $221 for 1993.
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For 1995, respondent concedes petitioner's tax liability is
$25,113, the amount shown by petitioner on his return for that
year. The parties agree that the total amount petitioner had
withheld from his wages was $24,943. Petitioner's income tax
deficiency for 1995 is $170.
Respondent determined that petitioner is liable for an
addition to tax under section 6651(a)(1) for failure to file a
timely return for 1995. Generally, individual income tax returns
must be filed on or before the 15th day of April following the
close of the calendar year. Sec. 6072(a).
Section 6651(a)(1) provides for an addition to tax for
failure to file a timely return. The addition to tax is equal to
5 percent of the amount required to be shown as tax on the
return, with an additional 5 percent for each additional month or
fraction thereof during which such failure continues, not
exceeding 25 percent in the aggregate.
A taxpayer may avoid the addition to tax by establishing
that the failure to file a timely return was due to reasonable
cause and not willful neglect. Rule 142(a); United States v.
Boyle, 469 U.S. 241, 245-246 (1985). Petitioner presented no
evidence as to the cause for the late filing. In the absence of
a satisfactory explanation for the failure to file a timely
return, we cannot conclude that the failure was due to a
reasonable cause. Consequently, we uphold respondent's
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determination that petitioner is liable for an addition to tax
for the 1995 taxable year pursuant to section 6651(a)(1).
To reflect the foregoing,
Decision will be entered
under Rule 155.