T.C. Memo. 2000-36
UNITED STATES TAX COURT
LOREN H. SCHWECHTER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15583-95. Filed February 4, 2000.
Leonard T. Timpone, for petitioner.
Lauren W. Gore, for respondent.
MEMORANDUM OPINION
GALE, Judge: Respondent determined the following
deficiencies in petitioner’s Federal income tax:
Year Deficiency
1988 $9,866
1989 1,612
1991 414
We must decide the following:
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1. Whether the limitations period for assessing taxes for
the years 1988 and 1989 has expired. We hold that it has not.
2. Whether petitioner has made overpayments with respect to
1988 and 1989. We hold that he has, to the extent provided.
3. Whether any credits or refunds of overpayments made by
petitioner with respect to 1988 and 1989 are allowable. We hold
they are not.
Some of the facts have been stipulated and are so found. We
incorporate by this reference the stipulation of facts and the
attached exhibits. At the time of filing the petition,
petitioner resided in Miami, Florida.
The dispute in this case centers upon whether petitioner
timely filed his Federal income tax returns for years 1988 and
1989 or otherwise made a timely claim for refund for those years.
Petitioner claims to have filed his 1988 and 1989 returns prior
to the filing deadlines, including extensions, and that
accordingly, the notice of deficiency issued by respondent in May
1995 with respect to those years was untimely. Petitioner offers
no other argument or evidence to dispute the amount of the
deficiencies determined for 1988, 1989, or 1991. Petitioner
further claims that he is entitled to refunds for certain
overpayments made with respect to 1988 and 1989 because he timely
filed returns or made timely claims for refund through
correspondence sent to respondent. Respondent contends, and his
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records indicate, that although petitioner obtained 122-day
extensions for filing his 1988, 1989, and 1991 returns, he did
not file such returns until October 4, 1993, and accordingly the
notice of deficiency is timely, and no timely claim for refund or
credit with respect to 1988 or 1989 was made.
Petitioner is a nonpracticing attorney who formerly worked
for respondent as an attorney in the estate and gift tax area.
During 1988 and 1989, petitioner operated a consulting enterprise
which valued businesses and performed forensic accounting work.
During this period, petitioner also worked as an employee and
Federal income tax was withheld from his wages.
Petitioner claims to have timely filed his returns for the
years 1988 and 1989 on August 11, 1989, and May 7, 1990,
respectively, taking into account the filing extensions that it
has been stipulated he received. According to petitioner, he
hand delivered these returns to one of respondent’s offices in
Florida, because he had experienced difficulties in the past with
respect to prior returns in that respondent had mistakenly
claimed that petitioner had failed to file them. Petitioner did
not produce copies of these purportedly hand-delivered returns at
trial and maintains that he inadvertently discarded them in May
1993, when disposing of records relating to his divorce.
Respondent’s records indicate that while petitioner filed for 4-
month extensions for 1988, 1989, and 1991 on April 11, 1989,
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April 15, 1990, and April 15, 1992, respectively, he did not file
returns for those years until October 4, 1993. To prove that he
filed his returns on time, notwithstanding the absence of copies
of the timely filed returns or of any entry in respondent’s
records, petitioner relies on his own testimony, the testimony of
his mother, a series of letters purportedly sent by him to
respondent during the period 1989 through 1995, and evidence of
certain divorce proceedings between him and his former spouse.
With respect to the divorce, petitioner claims that as part
of protracted proceedings that lasted from 1983 until 1991, he
was required to submit, and did submit, copies of his filed 1988
and 1989 returns to the divorce court. In addition, he asserts
that his right to obtain a refund was used in the calculation of
his child support obligations. However, petitioner never
introduced any records from the divorce proceedings. In fact,
the only records from the divorce proceedings that are in
evidence were introduced by respondent, and they do not support
petitioner’s claims. In a judgment filed on October 30, 1989,
the divorce court made detailed findings concerning petitioner’s
assets, which the court then allocated among petitioner’s
creditors and former spouse, to whom petitioner owed a family
support arrearage of $29,773. Despite finding insufficient
assets to satisfy petitioner’s obligations, the divorce court
made no mention of petitioner’s 1988 return or the refund in
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excess of $16,000 claimed thereon, even though the judgment was
entered approximately 2-1/2 months after petitioner contends he
filed his 1988 return.
Petitioner’s mother (Mrs. Schwechter) testified that she
recalled seeing copies of petitioner’s tax returns for the years
in issue that were stamped to indicate receipt by the Internal
Revenue Service.1 However, her testimony is inconsistent and
contrary to other evidence in the record; we therefore find it
unreliable. First, Mrs. Schwechter testified that she was
present in the divorce court when petitioner was asked to produce
his tax returns, including those for the years in issue, and that
he produced such returns. Later, she testified that she saw
copies of the returns, but she denied any recollection that those
tax returns were presented during the divorce proceedings.
Furthermore, Mrs. Schwechter could not recall any of the dates
during 1988 and 1989 when the divorce hearings took place,
despite the fact that she was a co-defendant and under subpoena
to attend. Moreover, the divorce court’s October 1989 judgment
made no mention of any refunds owed to petitioner, supporting an
inference that it did not obtain access to the 1988 return
despite Mrs. Schwechter’s testimony to the contrary. For all
1
Mrs. Schwechter does not claim to have seen petitioner
prepare or file his returns.
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these reasons, we give little weight to Mrs. Schwechter’s
testimony.
Petitioner also introduced as circumstantial evidence of
timely filing, and as documentation of subsequent informal claims
for refund, copies of a series of letters purportedly sent by him
to the Internal Revenue Service during the years 1989 through
1995. Three of the letters purportedly sent to respondent on
December 17, 1989, April 4, 1990, and April 24, 1992, concern
only petitioner’s 1988 return. Another four letters purportedly
sent to respondent on August 2, 1990, January 23, 1991,
January 22, 1992, and March 16, 1992, address both petitioner’s
1988 and 1989 returns. Two additional letters introduced by
petitioner appear to be duplicate copies of one of the previously
mentioned letters, and a third was dated after the mailing of the
notice of deficiency. While the letters vary in length and
specificity, they all make it clear that petitioner is seeking a
refund for taxes paid in 1988 and/or 1989. Petitioner has
offered the letters for two distinct purposes. First, petitioner
offers the letters as circumstantial proof that he timely filed
his 1988 and 1989 returns. Second, petitioner contends that the
letters themselves constitute informal claims for refund.
We do not believe these letters are probative evidence
because the record demonstrates that the dates on some of
petitioner’s correspondence with the Internal Revenue Service
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have been misrepresented or falsified, casting doubt on the
authenticity of the dates on the rest. For example, petitioner
offered into evidence an undated letter from him addressed to the
Internal Revenue Service, Collection Division, Atlanta, Georgia,
in which he demands payment of refunds for the 1988 and 1989
taxable years. Attached to the letter as it was offered as an
exhibit is a U.S. Postal Service Receipt for Certified Mail, with
the addressee noted as “IRS Service Center, Atlanta Georgia” and
a postmark of January 23, 1991. The clear import of stapling the
January 23, 1991, certified mail receipt to the undated letter
was to suggest that the letter had been sent on that date.
However, petitioner also introduced the identical undated letter
into evidence in two other formats. In one, the undated letter
has attached to it a May 2, 1994, letter from respondent to which
the undated letter appears to respond. In yet another exhibit,
the copy of this same undated letter contains a stamp indicating
receipt by respondent on June 8, 1994.
In another example, respondent introduced into evidence a
letter written to respondent by petitioner which was dated
February 24, 1995, and, according to both the date filled out on
the facsimile cover sheet and the date stamp of the facsimile
machine, was faxed to respondent on February 27, 1995. This
February 1995 letter made specific reference to, and attached a
copy of, another letter which petitioner claimed he had written
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to respondent in 1993. However, the attached copy of the letter
claimed by petitioner to have been written in 1993 is dated
August 27, 1995. Asked at trial to account for this
chronological discrepancy, petitioner offered no explanation.
We conclude that petitioner is, at best, confused about when
he sent written correspondence to respondent. On this record, we
find that the dates on the letters petitioner claims to have sent
to respondent are unreliable, because it has been demonstrated in
at least two instances that petitioner’s claims about the dates
of his letters are in error, creating an inference that the dates
on other correspondence introduced by petitioner may have been
altered. Moreover, there is insufficient evidence that the
letters relied on by petitioner were in fact mailed to
respondent. The one certified mail receipt introduced by
petitioner is attached to a letter that other evidence indicates
was sent approximately 3-1/2 years later, as discussed supra.
Besides petitioner’s self-serving testimony, the only proof that
letters were actually mailed concerns two letters received by
respondent on June 8, 1994, and February 27, 1995. Therefore, we
conclude that the letters in the record are not probative on the
question of whether petitioner timely filed his returns or made
timely claims for refund with respect to any of the years in
issue.
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In addition to the foregoing difficulties with petitioner’s
corroborating evidence, his own testimony is highly implausible.
As an explanation for the absence of stamped copies of the
purportedly hand-delivered and timely filed returns, petitioner
claims that he inadvertently discarded them in May 1993 when he
disposed of records relating to his divorce proceedings. We find
it implausible that petitioner would not have kept closer track
of these returns if, as he claims, he had experienced trouble in
the past with the IRS losing his returns. Moreover, petitioner
claims to have written, and has introduced into evidence, several
letters inquiring about his refunds for 1988 and 1989 which
purportedly were written prior to May 1993. We find it
remarkable, given petitioner’s work experience with the IRS, that
not one of these letters expressing concern about overdue refunds
enclosed a copy of the timely filed returns for the years in
issue if such returns were in fact in petitioner’s possession
until May 1993. Finally, we find it implausible that petitioner
discarded the returns, yet managed to retain copies of extensive
pre-May 1993 correspondence that he purportedly sent to
respondent concerning the returns.
The parties agree that petitioner submitted returns for 1988
and 1989 on October 4, 1993. Petitioner contends that such
returns were merely duplicates of previously filed, timely
returns. Respondent contends that no returns for 1988 or 1989
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were filed until that date. On the basis of the entire record in
this case, we conclude that petitioner has failed to show that a
return was filed, or that a claim for refund was made, prior to
October 4, 1993.
On the returns submitted on October 4, 1993, petitioner
reported wages, interest, and dividend income for 1988 and 1989
of $82,452.96 and $22,716.54, respectively. Petitioner claimed
Schedule C business deductions for 1988, 1989, and 1991 of
$61,381, $46,062, and $30,374, respectively. After claiming
various deductions not at issue in this case, the returns show
taxes of $2,501 for 1988 and $0 for 1989. For 1988 and 1989,
$19,209 and $5,295.872 were withheld from petitioner’s wages,
respectively. The returns sought refunds of $16,708 and
$7,796.873 for 1988 and 1989, respectively.
On May 11, 1995, respondent issued a notice of deficiency
with respect to petitioner’s 1988, 1989, and 1991 taxable years.
In the notice, respondent disallowed Schedule C business expenses
in the amount of $34,381, $30,770, and $11,021 in 1988, 1989, and
2
Although the parties’ stipulation states the amount
withheld for 1989 was $5,285.87, petitioner’s return for the
year, respondent’s certificate of assessments and payments for
petitioner with respect to that year, and an earlier stipulation
record the figure as $5,295.87.
3
The $7,796.87 refund sought for 1989 exceeds the $5,295.87
in withheld taxes for that year by $2,501. On his 1989 return,
petitioner appears to have treated the $2,501 in taxes shown as
due on his 1988 return as an amount available as a credit against
his 1989 tax liability.
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1991, respectively. Respondent also determined that petitioner
had unreported unemployment compensation income of $5,200 in 1989
and was liable for self-employment tax of $414 in 1991. After
taking into account certain net operating loss carrybacks, the
notice determined deficiencies of $9,866, $1,612, and $414 for
1988, 1989, and 1991, respectively.
1. The Deficiency Determinations
Petitioner has offered no evidence or argument in support of
his averments in the petition that respondent’s deficiency
determinations for the years in issue are in error, other than to
claim that the notice of deficiency is invalid because untimely.
The Commissioner has 3 years from the time a return is filed
to issue a notice of deficiency with respect to income tax. See
secs. 6212(a),4 6213(a), 6501(a), 6503(a)(1). Even if
petitioner’s claim based on the statute of limitations were
properly before the Court,5 he would not prevail. In general, a
return is deemed to have been filed when it is received by
4
Unless otherwise noted, 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.
5
Petitioner did not raise this claim in his petition or
seek amendment thereto. See United Bus. Corp. of Am. v.
Commissioner, 19 B.T.A. 809, 831-832 (1930), affd. 62 F.2d 754
(2d Cir. 1933); Oliver v. Commissioner, T.C. Memo. 1997-84; see
also Columbia Bldg., Ltd. v. Commissioner, 98 T.C. 607, 611
(1992); Badger Materials, Inc. v. Commissioner, 40 T.C. 1061,
1062-1063 (1963), withdrawing in part and modifying 40 T.C. 725
(1963).
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respondent. See United States v. Lombardo, 241 U.S. 73, 76
(1916). As previously discussed, we do not find petitioner’s
testimony, or the corroborating evidence he has offered, reliable
or credible with respect to his claim that he timely filed his
returns for the years in issue. Moreover, even if any of
petitioner’s evidence were reliable, it would still fall short of
the type of corroboration we have found sufficient to prove
timely filing when a return is lost and the Commissioner has no
record of receiving it. Typically, we have required reliable
testimony or other corroborating evidence of the circumstances
surrounding the return’s preparation and mailing. See, e.g.,
Estate of Wood v. Commissioner, 92 T.C. 793 (1989), affd. 909
F.2d 1155 (8th Cir. 1990); Mitchell Offset Plate Serv., Inc. v.
Commissioner, 53 T.C. 235, 239-240 (1969); see also Rakosi v.
Commissioner, T.C. Memo. 1993-68 (taxpayer failed to prove she
filed her return where she did not produce any documentary
evidence of timely mailing and relied solely on the self-serving
testimony of herself and her husband), affd. without published
opinion 46 F.3d 1144 (9th Cir. 1995). Here petitioner has
offered no corroborating evidence with respect to the
preparation, mailing, or delivery of the returns. Thus we
conclude that petitioner did not file his 1988 and 1989 returns
prior to October 4, 1993. Since we conclude that petitioner did
not submit returns for the years in issue until October 4, 1993,
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the May 11, 1995, notice of deficiency was timely because issued
within 3 years of October 4, 1993. In the absence of any other
evidence or argument to support petitioner’s allegations of
error, respondent’s deficiency determinations for the years in
issue are sustained.
2. Amount of Overpayment
The parties have stipulated that $19,209 and $5,295.87 were
withheld from petitioner’s wages in 1988 and 1989, respectively.
Section 6401(b) provides that refundable credits, such as taxes
withheld from wages under section 31, exceeding the income tax
imposed for each year shall be considered overpayments of tax.
In the instant case, the income tax imposed for 1988 and 1989
equals the sum of the deficiency and the amount shown as tax by
the petitioner on his return for each year. See sec. 6211(a) and
(b)(1). For 1988, the deficiency is $9,866 and the amount shown
on the return was $2,501; thus, the income tax imposed for 1988
is $12,367. For 1989, the deficiency is $1,612 and the amount
shown on the return was $0; thus, the income tax imposed for 1989
is $1,612. Accordingly, petitioner has an overpayment for 1988
of $6,842 (a section 31 credit of $19,209 less the tax imposed of
$12,367), and an overpayment for 1989 of $3,683.87 (a section 31
credit of $5,295.87 less tax imposed of $1,612).
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3. Petitioner’s Entitlement to Credits or Refunds of the 1988
and 1989 Overpayments
Although we have determined that an overpayment exists, our
jurisdiction to order a refund or credit of an overpayment is
limited and depends upon when the taxes were paid. See secs.
6511(a) and (b) and 6512(b); Commissioner v. Lundy, 516 U.S. 235
(1996). The withholding taxes making up the overpayments for
1988 and 1989 are deemed paid on April 15, 1989, and April 15,
1990, respectively. See sec. 6513(b)(1). Under section
6512(b)(3), we may order the credit or refund of an overpayment
only if one of three conditions is met. The first condition, set
out in section 6512(b)(3)(A), requires that the tax be paid after
the mailing of the notice of deficiency, which did not occur
here.
The second condition, set out in section 6512(b)(3)(B),
allows a credit or refund of an overpayment if a claim for refund
deemed filed on the date the notice of deficiency was mailed
would have constituted a timely claim for refund of the overpaid
amount under applicable limitations periods prescribed in section
6511(b)(2), (c), or (d). Since the returns for 1988 and 1989
filed by petitioner on October 4, 1993, each sought a refund,
petitioner made actual claims for refund for both years more than
19 months earlier than a claim deemed filed, pursuant to section
6512(b)(3)(B), on the date of the May 11, 1995, notice of
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deficiency. Thus, the deemed claim under section 6512(b)(3)(B)
offers no benefit to petitioner.
The third condition, set out in section 6512(b)(3)(C),
applies where an actual claim for refund, which is timely under
section 6511, has been filed before the mailing of the notice of
deficiency and either has not been disallowed or, if disallowed,
was or could have been the basis of a timely refund suit as of
that date. In such circumstances, any credit or refund is
limited to taxes paid within the periods specified in section
6511(b)(2), (c), or (d).
As noted, the 1988 and 1989 returns filed by petitioner on
October 4, 1993, each sought a refund; thus the refund claim on
each return would be timely under section 6511 because made
“within 3 years from the time the return was filed”. Sec.
6511(a). We therefore consider whether the taxes at issue were
paid within the periods specified in section 6511(b)(2), (c), or
(d). Section 6511(c) and (d) contains special rules not
applicable in this case. We accordingly consider section
6511(b)(2).
Section 6511(b)(2) limits the allowance of a claim for
credit or refund based upon whether the claim was filed within 3
years from the filing of the return, see sec. 6511(b)(2)(A), was
not filed within such period, see sec. 6511(b)(2)(B), or was not
filed at all prior to allowance, see sec. 6511(b)(2)(C). The
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returns filed on October 4, 1993, for 1988 and 1989 both asserted
claims for refund (which accordingly fall within the 3-year
period), subjecting these claims to the limitation imposed by
section 6511(b)(2)(A). Under this limitation, the overpaid taxes
must have been paid in the 3-year period, plus any return filing
extensions, immediately preceding the filing of the claim. Thus,
only taxes paid in the 3 years and 122 days6 preceding October 4,
1993-–that is, after June 3, 1990-–are subject to credit or
refund based on the claims made in the October 4, 1993 returns.
As the taxes at issue were deemed paid on April 15, 1989, and
April 15, 1990, we do not have authority under section
6511(b)(2)(A)(as incorporated by section 6512(b)(3)(C)) to credit
or refund them based on petitioner’s late-filed 1988 and 1989
returns.
Petitioner also argues that the various letters he wrote to
respondent inquiring about his 1988 and 1989 refunds constitute
informal claims for refund. While petitioner introduced into
evidence certain letters purporting to have dates prior to
April 15, 1991, and April 15, 1992, we have concluded, for the
reasons previously discussed, that these letters were not sent to
respondent on or near the dates indicated on the letters. The
only letters of petitioner’s in the record for which there is
6
It has been stipulated that petitioner received 122-day
extensions for filing both his 1988 and 1989 returns.
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evidence of receipt by respondent were sent in 1994 and 1995.
Thus, petitioner has not made a claim for refund prior to
October 4, 1993, and accordingly we are without authority to
order a credit or refund of taxes under section 6511(b)(2)(B) (as
incorporated by section 6512(b)(3)(C)).
We therefore conclude that we are without authority to order
any credit or refund of petitioner’s 1988 and 1989 overpayments.
Nevertheless, although neither party has addressed this issue,
our conclusion regarding the overpayments does not mean that
petitioner is required to make any payment in respect of the 1988
and 1989 deficiencies sustained herein. Petitioner is entitled
to offset his unassessed withholding taxes for 1988 and 1989
against the 1988 and 1989 deficiency amounts, respectively. See
White v. Commissioner, 72 T.C. 1126, 1133 (1979) (estimated taxes
may offset tax liability attributable to a deficiency for same
year); Baral v. Commissioner, T.C. Memo. 1978-383 (withholding
taxes may offset tax liability attributable to a deficiency for
same year).
To reflect the foregoing,
Decision will be entered
under Rule 155.