123 T.C. No. 6
UNITED STATES TAX COURT
MICHAEL ZARKY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8549-03. Filed July 20, 2004.
P did not file a Federal income tax return for
1999. Within 3 years of the due date of that return,
R mailed a notice of deficiency to P for 1999.
Following R’s concession that P had no tax liability
but had a $270 overpayment for 1999, the parties
dispute whether P is entitled to that overpayment. The
$270 had been withheld from interest payments which
were made to P during 1999.
Held: Pursuant to the flush language of sec.
6512(b), I.R.C., which was added to the Code by the
Taxpayer Relief Act of 1997, Pub. L. 105-34, sec.
1282(a) and (b), 111 Stat. 1037, effective for taxable
years ended after Aug. 5, 1997, and sec. 6513(b)(1),
I.R.C., which treats P as having paid the $270 to R on
Apr. 15, 2000, P is entitled to the $270 overpayment.
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Michael Zarky, pro se.
John D. Faucher, for respondent.
LARO, Judge: Petitioner petitioned the Court to redetermine
respondent’s determinations as to petitioner’s 1999 taxable year.
Respondent determined that petitioner is liable for a $63,066
deficiency and additions thereto of $14,129.10, $9,105.42, and
$3,014.25 under sections 6651(a)(1) and (2) and 6654(a),
respectively.1 Petitioner asserted in his petition that he is
entitled to a $270 overpayment.
Following respondent’s concession that petitioner overpaid
his 1999 Federal income tax by $270, we are left to decide
whether petitioner is entitled to that overpayment. We hold he
is.
FINDINGS OF FACT
The parties have filed with the Court certain stipulations
of fact and an exhibit related thereto. We incorporate herein
the stipulated facts and exhibit and find the stipulated facts
accordingly. Petitioner resided in Moorpark, California, when
his petition was filed.
1
Unless otherwise indicated, section references are to the
applicable versions of the Internal Revenue Code.
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Petitioner did not file a 1999 Federal income tax return.
His taxable income for that year totaled $874, all from interest
earned on his savings accounts. The payors of that interest
notified respondent that they had paid this interest to
petitioner as income and that they had withheld $270 of it as
Federal income tax. Respondent was also notified by a brokerage
firm that petitioner had during 1999 received $212,029 from
brokerage sales.
Respondent determined in the relevant notice of deficiency
mailed to petitioner on February 27, 2003, that petitioner’s 1999
gross income included both the $212,029 and the $874. Respondent
has since conceded that none of the $212,029 was so includable
and that petitioner has overpaid his 1999 Federal income tax by
the withheld amount of $270.
OPINION
Petitioner seeks the $270 that he overpaid for 1999.
Respondent argues that petitioner is not entitled to that amount
because, respondent states, none of it was paid within the 2-year
period of section 6511(a).
We conclude that petitioner is entitled to the $270
overpayment. Section 6512(b)(1) empowers this Court to determine
the existence and amount of any overpayment of tax to be refunded
for a year before us. Under section 6512(b)(3)(B), however, we
may not award a refund in a case such as this unless we determine
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that the refunded amount was paid “within the period which would
be applicable under section 6511(b)(2) * * *, 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”.
For taxable years ended before August 6, 1997, the period of
section 6511(b)(2) that was applicable in a case such as this was
the 2-year period of section 6511(b)(2)(B). Commissioner v.
Lundy, 516 U.S. 235 (1996); see also Healer v. Commissioner,
115 T.C. 316 (2000). For taxable years ended after August 5,
1997, however, the Taxpayer Relief Act of 1997, Pub. L. 105-34,
sec. 1282(a) and (b), 111 Stat. 1037, added to section 6512(b)
flush language that in certain cases lengthened this 2-year
period. That language provides that the applicable period under
section 6511(a) and (b)(2) is 3 years “In a case described in
subparagraph (B) [of section 6512(b)(3)] where the date of the
mailing of the notice of deficiency is during the third year
after the due date (with extensions) for filing the return of tax
and no return was filed before such date”.2 Thus, in a case of a
taxpayer such as petitioner who as of the date of the mailing of
a notice of deficiency had not filed a Federal income tax return
for a taxable year ended after August 5, 1997, but who has
2
We are unaware of any case in which a Court has applied
the 3-year rule described in this flush language.
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petitioned this Court seeking an overpayment for that year,
section 6512(b) allows the taxpayer to receive that overpayment
to the extent that it relates to amounts paid within 3 years of
the notice of deficiency. See also H. Conf. Rept. 105-220, at
701 (1997), 1997-4 C.B. (Vol. 2) 1457, 2171:
The House bill permits taxpayers who initially
fail to file a return, but who receive a notice of
deficiency and file suit to contest it in Tax Court
during the third year after the return due date, to
obtain a refund of excessive amounts paid within the
3-year period prior to the date of the deficiency
notice.
Pursuant to section 6513(b)(1), the $270 that was withheld
from petitioner’s interest income was considered paid to the
Commissioner by petitioner on April 15, 2000. Accordingly, in
order for petitioner to prevail as to his 1999 overpayment,
(1) the relevant notice of deficiency must have been mailed to
him during the third year after the due date of his 1999 return
and (2) he must have paid the $270 within 3 years of the mailing
of the notice of deficiency. Given that the notice of deficiency
was in fact mailed within the applicable period and that
petitioner was considered during the applicable period to have
paid the $270 to the Commissioner, we hold that petitioner is
entitled to the $270 overpayment.
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All of the parties’ arguments have been considered, and
those arguments not discussed herein have been found to be
without merit. Accordingly,
Decision will be entered
stating that there is no deficiency
or addition to tax due from
petitioner and that there is a $270
overpayment due to petitioner for
1999.