dissenting: The majority hold that this Court has authority to apply the doctrine of equitable recoupment and “that petitioner is entitled to recoup the residuary legatee’s excessive payment of income tax against the estate tax deficiency.” See majority op. p. 7. For the reasons set forth in my dissent in Estate of Mueller v. Commissioner, 101 T.C. 551, 565-571 (1993) (Mueller II), I respectfully dissent.
The majority opinion and Judge Laro’s concurring opinion do not attempt to deal with the substance of that dissent; instead, they focus on this Court’s status as a court, as a result of the amendments made by the Tax Reform Act of 1969 (TRA ’69), Pub. L. 91-172, sec. 951, 83 Stat. 730. I am well aware of the text of TRA ’69, its legislative history, and the Congress’ intentions. I am satisfied that there is nothing in the materials considered by or generated by the Congress in connection with TRA ’69 that speaks to the issue of equitable recoupment; however, it is clear that the Congress did not intend to make this Court an “Article III court”.
Firstly, clearly, this Court is a court.
Secondly, this Court is not a Federal District Court. This Court is a Federal trial court, like the District Courts, and must abide by the same Federal Rules of Evidence. However this Court has statutory authority to prescribe its own Rules of Practice and Procedure (sec. 7453), which in many respects are different from the Federal Rules of Civil Procedure. This Court has statutorily prescribed deficiency jurisdiction, which the District Courts do not have; the District Courts have refund jurisdiction, which this Court does not have (except where an overpayment is developed in a case that began as a deficiency case, or in a “TEFRA partnership” or S corporation case). This Court has developed the “Lawrence doctrine”, modified by the “Golsen doctrine”, as described in Lardas v. Commissioner, 99 T.C. 490, 493-495 (1992), which does not have a practical counterpart in the District Courts. This Court’s burden of proof rules in deficiency cases differ in some respects from those applicable in refund cases in the District Courts. See in this connection Helvering v. Taylor, 293 U.S. 507, 514 (1935). As to other differences between this Court and the District Courts, see Commissioner v. Lundy, 516 U.S. 235, 244-245, 252 (1996).
Thirdly, as to the critical dispute in the instant case, this Court and the District Courts differ in their statutory powers in such a way that equitable recoupment fits what the District Courts do (decide directly how much, including interest, the Government must pay to the taxpayer, or vice versa) and does not fit what this Court does, redetermine the amount of the deficiency, if any, which is merely one factor in how much must be paid.
Fourthly, nothing in the concepts of a “court”, or a “court of law”, makes equitable recoupment an essential characteristic of a court, or of a court of law.
My position remains that we are to resolve those matters which affect the amount of the estate tax deficiency to be set forth on the decision document we enter in the instant case. Equitable recoupment does not affect any of the elements of the deficiency, as statutorily defined, and so does not affect the decision we enter. Judge Beghe’s concurring opinion does deal with this Court’s deficiency jurisdiction, which is the only jurisdiction that brings the instant case before us. Judge Beghe’s concurring opinion suggests a route by which the square peg of recoupment could be squeezed into the round hole of the statutory definition of deficiency.1
However, several aspects of this suggested route remain to be paved. Firstly, “deficiency” and “underpayment” are defined terms. Secs. 6211, 6664(a). They are not legal fictions. The amount, if any, that a taxpayer may have to pay to the Government may well be different from the amount of the deficiency or any underpayment.
Secondly, the Supreme Court has recently indicated that, as to the Tax Court, the statute of limitations (the major impediment that equitable recoupment is designed to circumvent) must be given a strict application, and the equities are unavailing. See Commissioner v. Lundy, 516 U.S. 235 (1996). Thus, this Court was barred from holding that Lundy overpaid his income taxes even if his claim for refund would have been timely in a District Court. See id. at 251-253 (majority op.), 253-254, 263 (Thomas, J., dissenting). Also, Lundy lost even though it was clear that Lundy and his wife had substantially overpaid their income taxes. See id. at 237. Lundy did not involve the staleness, missing documents, and faded memories that statutes of limitations are generally established to guard against. The majority of the Supreme Court determined that there was no room for legal fictions suggested by Justices Thomas and Stevens, the Court of Appeals for the Fourth Circuit, or Lundy’s counsel, to correct this obvious injustice, and the Government was permitted to hold onto the Lundys’ overpaid taxes solely because of the text of the then-applicable statute of limitations. Of course, Lundy’s situation does not fit into the current mold of equitable recoupment. The relevance of Lundy to our discussion is the Supreme Court’s focus on the details of statutory grants and limitations of power and jurisdiction, and that Court’s reluctance to modify the strictness of the statute even to correct an obvious injustice.
Thirdly, Judge Beghe’s concurrence relies on the analysis of equitable recoupment in Justice Stevens’ dissent in United States v. Dalm, 494 U.S. 596, 612-623 (1990). Although much understanding may be gleaned from a distinguished jurist’s dissent, the fact remains that the dissent is what the Supreme Court’s majority rejected.
Cohen and Whalen, JJ., agree with this dissent.This imagery is generally thought to have originated in Sidney Smith’s reference to “a square person has squeezed himself into the round hole.” Sketches of Moral Philosophy (1850).