T.C. Summary Opinion 2003-24
UNITED STATES TAX COURT
JAMES GILL AND KATIE GILL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8023-02S. Filed March 19, 2003.
James and Katie Gill, pro sese.
Michael D. Zima, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time that the petition was filed.1 The decision to
be entered is not reviewable by any other court, and this opinion
should not be cited as authority.
1
All subsequent section references are to the Internal
Revenue Code in effect for 1999, the taxable year in issue.
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Respondent determined a deficiency in petitioners’ Federal
income tax for the taxable year 1999 in the amount of $577.
The only issue for decision is whether respondent should be
estopped from collecting an erroneous refund paid in respect of
what respondent concedes was petitioners’ properly reported tax
liability for the year in issue. We hold that respondent should
not be so estopped.
Background
Some of the facts have been stipulated, and they are so
found. Petitioners resided in Cocoa, Florida, at the time that
their petition was filed with the Court.
In 1999, petitioner Katie Gill (Mrs. Gill) received, inter
alia, Social Security benefits in the amount of $7,614. The
Social Security Administration issued a Form SSA-1099, in respect
of such benefits. Although the record does not include a copy of
the Form SSA-1099 that was sent to Mrs. Gill, box 5 would
presumably have shown the amount of $7,614.2
Respondent’s Instructions for Form 1040A for 1999 direct the
taxpayer to report on line 13a (Social Security benefits) the
amount from box 5 of the taxpayer’s Form SSA-1099. Respondent’s
2
Form SSA-1099 for 1999 includes the following eight
boxes: Box 1 “Name”; Box 2 “Beneficiary’s Social Security
Number”; Box 3 “Benefits Paid in 1999"; Box 4 “Benefits Repaid to
SSA in 1999"; Box 5 “Net Benefits for 1999 (Box 3 minus Box 4)”; Box
6 “Voluntary Federal Income Tax Withheld”; Box 7 “Address”; and
Box 8 “Claim Number (Use this number if you need to contact
SSA.)”.
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Instructions then direct the taxpayer to report on line 13b
(“Taxable amount (see page 28)”) the portion of the taxpayer’s
Social Security benefits that is taxable pursuant to the
Worksheet on page 29 of the Instructions.3
In completing their 1999 Form 1040A, petitioners left line
13a blank and placed the figure “3807.00" in line 13b. The
figure “3807.00" represents one-half of the Social Security
benefits that were received by Mrs. Gill in 1999; that figure
also correctly represents the amount of such benefits that was
properly includable in petitioners’ income for 1999.
On their 1999 Form 1040A, petitioners reported adjusted
gross income in the amount of $41,053, taxable income in the
amount of $28,353, and tax in the amount of $4,256.4 Petitioners
enclosed with their return a check in the amount of the
difference ($256.65) between their reported liability ($4,256)
and the total amount of their withholding ($3,999.35).
Upon receiving petitioners’ 1999 return, respondent
mistakenly concluded that petitioners had overreported their
income by $3,807; i.e., the amount reported on line 13b as the
taxable amount of Social Security benefits received. Respondent
3
The Worksheet reflects the statutory formula set forth in
sec. 86 that determines the amount of Social Security benefits
that is includable in the taxpayer’s gross income.
4
The parties agree that petitioners’ reported tax
liability of $4,256 represents petitioners’ correct tax liability
for 1999.
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then recalculated petitioners’ tax liability as $3,679 and, in
July 2000, issued a refund check in the amount of $580.99.5
Upon receiving the refund check, petitioners questioned the
matter by contacting one of respondent’s representatives at an
“800 number”. The representative agreed with petitioners that
respondent had made a mistake and requested that petitioners
return the refund check. Petitioners did so. However, a couple
of months thereafter, by letter dated September 7, 2000, another
of respondent’s representatives advised petitioners as follows:
We received the returned refund check for $580.99. Our
records show you incorrectly figured your pensions and
annuities as taxable social security. The refund is
correct and will be reissued.
If you have any questions, please call Ms. Robbin
Cooley * * * .
Petitioners contacted Ms. Cooley, who insisted that
petitioners had incorrectly reported their Social Security
benefits as taxable. Thereafter, upon receipt of the second
refund check, petitioners cashed it.
Ultimately, well over a year later, respondent concluded
that petitioners had correctly reported their Social Security
benefits and that respondent had erred in issuing petitioners a
5
The amount of $580.99 was calculated as follows:
Liability reported and paid per return $4,256.00
less: Liability as recalculated by respondent -3,679.00
Decrease in tax 577.00
plus: Interest due petitioners 3.99
Amount of refund check 580.99
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refund check. Accordingly, by notice dated March 22, 2002,
respondent determined a deficiency in petitioners’ income tax for
1999 in the amount of $577.
Discussion6
The parties agree that petitioners’ correct tax liability
for 1999 is $4,256, which is the amount reported by petitioners
as their tax liability on their 1999 Form 1040A. Nevertheless,
petitioners contend that they should not be liable for any
deficiency. At trial, petitioner James Gill expressed his view
as follows:
I’m very frustrated. I feel that I have been
harassed. I have tried over the years to do my own
taxes correctly and I did do them correctly in this
case, Your Honor.
If the Government makes a mistake, my feelings are
they ought to write it off. That was their –- I don’t
have the money, I have more debt problems; I have, you
know, a need for the money. The situation has changed
since 1999 and when I filed this return.
Essentially, petitioners seek to estop respondent from pursuing
the present action against them.
Although the doctrine of equitable estoppel is applicable
against the Commissioner, it is well established that the
doctrine is applied against the Commissioner with the utmost
caution and restraint. Schuster v. Commissioner, 312 F.2d 311,
6
We need not decide whether sec. 7491, concerning burden
of proof, applies to the present case because the facts are not
in dispute and the issue is one of law. See Higbee v.
Commissioner, 116 T.C. 438 (2001).
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317 (9th Cir. 1962), affg. 32 T.C. 998 (1959) and First W. Bank &
Trust Co. v. Commissioner, 32 T.C. 1017 (1959); Boulez v.
Commissioner, 76 T.C. 209, 214-215 (1981), affd. 810 F.2d 209
(D.C. Cir. 1987); Estate of Emerson v. Commissioner, 67 T.C. 612,
617 (1977). The rationale for this rule of law has been
articulated as follows:
the tendency against Government estoppel is
particularly strong where the official’s conduct
involves questions of essentially legislative
significance, as where he conveys a false impression of
the laws of the country. Obviously, Congress’s
legislative authority should not be readily
subordinated to the action of a wayward or
unknowledgeable administrative official. Accordingly,
the general proposition has been that the estoppel
doctrine is inapplicable to prevent the Commissioner
from correcting a mistake of law. See Automobile Club
v. Commissioner, 353 U.S. 180 [, 183-184 (1957)]. [Fn.
ref. and further citations omitted.]
Schuster v. Commissioner, supra at 317. In short, “the policy in
favor of an efficient collection of the public revenue outweighs
the policy of the estoppel doctrine in its usual and customary
context.” Id.
Although we can appreciate petitioners’ frustration, the
fact of the matter is that the events of the present case do not
provide a basis for estopping respondent from collecting an
erroneous refund paid in respect of what respondent concedes was
petitioners’ properly reported tax liability for the year in
issue. See Kronish v. Commissioner, 90 T.C. 684, 695-697 (1988);
Century Data Sys., Inc. v. Commissioner, 86 T.C. 157, 165 (1986);
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see also Dixon v. United States, 381 U.S. 68, 72-73 (1965);
McGuire v. Commissioner, 77 T.C. 765, 779-780 (1981).
Accordingly, we are left with no alternative but to sustain
respondent’s deficiency determination.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.7
7
In an action for redetermination of a deficiency, this
Court does not generally have jurisdiction over interest.
Accordingly, the decision that we shall enter will speak only to
petitioners’ liability for the $577 deficiency in income tax.
However, we note that at trial, counsel for respondent
acknowledged that interest on the deficiency will be abated by
respondent.