T.C. Summary Opinion 2001-14
UNITED STATES TAX COURT
JANET SCHOENE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3109-99S. Filed February 15, 2001.
Hedy P. Forspan, David Herman, and Peter Mendelsohn
(specially recognized), for petitioner.
Lydia A. Branche and Peter J. Labelle, for respondent.
POWELL, Special Trial Judge: This case was heard pursuant
to the provisions of section 74631 of the Internal Revenue Code
in effect at the time the petition was filed. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority.
1
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue, and Rule
references are to the Tax Court Rules of Practice and Procedure.
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The issue is whether petitioner is time barred from claiming
a refund of a $7,733 overpayment for her 1994 tax year.
Respondent contends that petitioner is time barred from recovery
by the operation of sections 6511 and 6512(b). Petitioner
contends, however, that she was “financially disabled” within the
meaning of section 6511(h), and, therefore, the period of
limitations set forth in section 6511 was tolled. At the time
the petition was filed, petitioner resided in New York, New York.
The facts are not in dispute and may be summarized as
follows. From 1994 to at least 1997, petitioner suffered from
depression. With respect to her 1994 Federal income tax return,
petitioner, through her accountant, requested and received an
automatic extension to file her return. Prior to the August 15,
1995, filing deadline petitioner requested and received an
additional extension to file until October 15, 1995. Petitioner,
however, did not submit her 1994 Federal income tax return until
after respondent issued the notice of deficiency in 1998.
Based on third party information, respondent prepared a
substitute return and issued a notice of deficiency to petitioner
on December 1, 1998. Respondent determined a deficiency and
additions to tax in petitioner’s 1994 Federal income tax as
follows:
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Additions to Tax
Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)
$11,358 $528.07 $481.13
Petitioner timely filed a petition with this Court
contesting the deficiency determined in the notice and claiming
an overpayment of $7,733. She also apparently submitted a return
to respondent seeking a refund of $7,733. Respondent concedes
that the return submitted is correct but contends that petitioner
is time barred from recovering the $7,733 overpayment by
operation of sections 6511 and 6512(b).
We generally have jurisdiction to determine the existence
and amount of any overpayment of tax to be credited or refunded
for years that are properly before us. See sec. 6512(b)(1).
For the taxable year 1994, section 6512(b)(3) (incorporating by
reference section 6511(b)(2)), however, provides that a claim for
credit or refund of an overpayment of tax must be filed by the
taxpayer within 3 years from the time the return was filed or
within 2 years from the time the tax was paid. If no return is
filed, the claim must be filed within 2 years from the time the
tax was paid. See Commissioner v. Lundy, 516 U.S. 235, 253
(1996).
In Commissioner v. Lundy, supra, the Supreme Court held that
where a taxpayer does not file a return prior to the notice of
deficiency being mailed, the Tax Court has jurisdiction to award
a refund only as to those taxes paid during the 2 years preceding
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the mailing of the notice of deficiency. Petitioner’s
overpayment results from withholding credits paid in 1994.
Pursuant to section 6513(b)(1) those credits are deemed paid on
April 15, 1995. Respondent mailed the notice of deficiency in
this case on December 1, 1998. None of the taxes withheld for
petitioner’s 1994 tax year were paid within the 2-year period
ending on December 1, 1998.
Congress amended section 6512(b)(3) in the Taxpayer Relief
Act of 1997, to provide that where a notice of deficiency is
issued within the third year after the due date of the taxpayer’s
return, as extended, and no return was filed, then the Tax Court
has jurisdiction to award a refund as to taxes paid within the 3
years preceding the mailing of the notice of deficiency. See
Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 1282, 111 Stat.
788, 1037. However, amended section 6512(b)(3) is applicable to
tax years ending after August 5, 1997. Furthermore, the notice
of deficiency here was mailed more than 3 years after the due
date of petitioner’s return (October 15, 1995), and none of the
taxes at issue were paid during the 3-year period preceding the
mailing of the notice of deficiency.
Petitioner argues that she should be given relief under
section 6511(h). Section 6511(h) was enacted as part of the
Internal Revenue Service Restructuring and Reform Act of 1998
(RRA 1998), Pub. L. 105-206, sec. 3202(a), 112 Stat. 685, 740.
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Section 6511(h) permits the tolling of the period of limitations
for taxpayers who are “financially disabled”. Petitioner
maintains that during this period of time she was “financially
disabled”.
We are willing to assume (but do not decide) that petitioner
would fall within the meaning of “financially disabled.”2
Section 6511(h), however, does “not apply to any claim for credit
or refund which * * * is barred by the operation of any law or
rule of law * * * as of the date of the enactment of this Act
[July 22, 1998].” RRA 1998, sec. 3202(b), 112 Stat. 741. As
noted, petitioner’s withholding credits were deemed paid on April
15, 1995. See sec. 6513(b)(1). Petitioner did not file her 1994
Federal income tax return before respondent issued a notice of
deficiency, and, therefore, as stated above, under section
6512(b)(3) petitioner’s refund claim was barred by operation of
law as of April 15, 1997. See Commissioner v. Lundy, supra at
253; see also Hart v. Commissioner, T.C. Memo 1999-186.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.
2
We note that this may be a very tenuous assumption. During
this period, petitioner owned and managed real estate, paid her
bills, and applied for unemployment compensation.