Berry v. Comm'r of Internal Revenue, Docket No. 6978-89.

• Decision Date: 18 September 1991
• Docket Number: Docket No. 6978-89.
• Citation: 97 T.C. 339,97 T.C. No. 23
• Parties: JACK H. BERRY AND CRISA A. BERRY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

97 T.C. 339

97 T.C. No. 23

JACK H. BERRY AND CRISA A. BERRY, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6978-89.

United States Tax Court

Filed September 18, 1991.

Ps had not filed a tax return for 1982 nor a claim for credit or refund of 1982 tax as of the date of mailing of deficiency notices to them. Ps actually overpaid their 1982 tax through withholding. Ps had executed a Form 872-A consent agreement more than two years after Payment of the 1982 tax. Held, the consent agreement does not revive the expired time period for filing a claim for credit or refund of the overpayment of tax and does not nullify the statutory limitation on the amount of any credit or refund allowable. Secs. 6501(c)(3) and (4), 6512(b) applied. Jack H. Berry, pro se.

Ruud L. DuVall, for the respondent.

PARKER, JUDGE:

By statutory notices of deficiency dated January 4, 1989, respondent determined deficiencies in petitioners' Federal income taxes and additions to tax as follows:

+-----------------+
                ¦Jack Berry:  ¦¦¦¦¦
                +-------------++++¦
                ¦      ¦      ¦¦¦¦¦
                +-----------------+
                

Additions to tax
                Year Deficiency Sec. 6651(a)(1) Sec. 6653(a)(1) Sec. 6654 Sec. 6661  
                1982               $13,299      $2,057            *  $665           $678        $2,057
                1983               10,878       1,506             *  544            294         1,506
                1984               13,106       2,018             *  655            428         2,018
                1985               10,309       1,210             *  515            198         1,210
                1986               10,243       750               **  512           179         1,256
                

Crisa Berry
                Additions to tax
                Year Deficiency Sec. 6651(a)(1) Sec. 6653(a)(1) Sec. 6654 Sec. 6661  
                1982               $6,928       $575              *  $346           $111        $575
                1983               1,516        377               *  277            ---         ---
                1984               6,378        494               *  319            55          494
                1985               8,146        860               *  407            130         860
                1986               8,277        869               **  411           110         869
                

Tax Court, 1991.Berry v. C.I.R.97 T.C. No. 23, 97 T.C. 339, Tax Ct. Rep. (CCH) 47,618, Tax Ct. Rep. Dec. (P-H) 97.23

FN* Plus 50 percent of the interest due on each deficiency under sec. 6653(a)(2).FN** Addition under sec. 6653(a)(1)(A), plus 50 percent of the interest due on the deficiency under sec. 6653(a)(1)(B).

Unless otherwise indicated, all section references are to the Internal Revenue Code as amended and in effect for the taxable years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

After concessions, ¹ the issue remaining for decision is whether petitioners are entitled to an overpayment of their 1982 tax. In so deciding, we must consider the impact of a Form 872-A, Special Consent to Extend the Time to Assess Tax, that was executed prior to petitioners' late filing of their 1982 tax return.

FINDINGS OF FACT

The parties submitted this case fully stipulated pursuant to Rule 122(a). The stipulation of facts and the exhibits attached thereto are incorporated herein by this reference.

Petitioners resided in Stafford, Virginia, at the time the petition was filed. Petitioners did not file Federal income tax returns for the taxable years 1982, 1984, 1985, and 1986. Petitioner Crisa A. Berry filed a return for 1983, claiming a filing status of “married filing separately.” Petitioner Jack H. Berry did not file a return for 1983. Petitioners are entitled to joint filing status for all years before the Court except 1983. Petitioners are not entitled to joint filing status for that year because petitioner Crisa A. Berry filed a “married filing separately return for that year.” ²

Although no return for the taxable year 1982 had been filed, on November 8, 1985, petitioners executed and, on November 14, 1985, respondent executed a Form 872-A, Special Consent to Extend the Time to Assess Tax, for the period ended December 31, 1982. ³ Paragraph 1 of this standard form supplied by respondent provides, generally, that any Federal income tax for 1982 may be assessed within 90 days after (a) the Internal Revenue Service (the “Service”) receives from the taxpayers a Form 872-T, Notice of Termination of Special Consent, (b) the Service mails a Form 872-T to the taxpayers, or (c) the Service mails a notice of deficiency for such period(s). Paragraph 3 states that “This agreement will not reduce the period of time otherwise provided by law for making such assessment.” Paragraph 4 states that “The taxpayer(s) may file a claim for credit or refund and the Service may credit or refund the tax within 6 (six) months after this agreement ends.”

Respondent mailed a separate notice of deficiency on January 4, 1989, to each petitioner for the taxable years 1982 through 1986. As of January 4, 1989, petitioners had not filed a Federal income tax return (Form 1040) for the taxable year 1982 and had not filed any claim for credit or refund of an overpayment of tax for the taxable year 1982. On March 30, 1989, petitioners submitted a 1982 joint Federal income tax return to the Director of Internal Revenue, Richmond District. See supra note 2.

One area originally in dispute for the years at issue concerned the Cloud Basin Partnership in which petitioners were involved. The parties have now stipulated that petitioners are entitled to a “cash out-of-pocket settlement” deduction in the amount of $12,194 in the taxable year 1982 and that petitioners must report income of $3,291 from the partnership in 1984. The record is silent as to the nature of the Cloud Basin Partnership, the extent of petitioners' investment in the partnership, and whether they are general or limited partners.

Due to the various concessions by petitioners and respondent, the parties now agree that petitioners' correct joint income tax liability for 1982 is $3,906 plus an addition to tax pursuant to section 6653(a)(1) in the amount of $195. Petitioners' withholding credits for the taxable year 1982 are $9,700. Respondent has allowed the taxes withheld in 1982 to offset the correct tax liability for 1982 and the addition to tax. Thus, it would appear that petitioners have made an overpayment in the amount of $5,599.

OPINION

Petitioners seek to have this Court determine that they have made an overpayment of their 1982 tax. The 1982 tax in question was paid through withholding from wages. On January 4, 1989, on the date the deficiency notices were mailed to them, petitioners had not filed a return for 1982 and had not filed a claim for credit or refund of an overpayment of 1982 tax. However, in November 1985, petitioners and respondent had executed a Form 872-A consent agreement for the 1982 taxable year.

Under section 6512(b)(1), this Court has jurisdiction to determine an overpayment of tax for the year or years at issue. However, section 6512(b)(2) (now section 6512(b)(3)) limits the amount of the allowable refund or credit based on the time of payment of the tax, i.e., paid after mailing of the deficiency notice or paid within certain limitations periods for filing a claim for credit or refund.

Section 6512(b)(2) (now section 6512(b)(3) and hereinafter cited as (b)(3)) provides that:

(3) LIMIT ON AMOUNT OF CREDIT OR REFUND. -- No such credit or refund shall be allowed or made of any portion of the tax unless the Tax Court determines as part of its decision that such portion was paid --

(A) after the mailing of the notice of deficiency,

(B) within the period which would be applicable under section 6511(b)(2), (c), or (d), 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, or

(C) within the period which would be applicable under section 6511(b)(2), (c), or (d) in respect of any claim for refund filed within the applicable period specified in section 6511 and before the date of the mailing of the notice of deficiency --

(i) which had not been disallowed before that date,

(ii) which had been disallowed before that date and in respect of which a timely suit for refund could have been commenced as of that date, or

(iii) in respect of which a suit for refund had been commenced before that date and within the period specified in section 6532.

Here, no portion of the 1982 tax was paid after the mailing of the deficiency notices. Sec. 6512(b)(3)(A). No claim for credit or refund had been filed as of the date of mailing of the deficiency notices. Sec. 6512(b)(3)(C). The question is whether any portion of the tax was paid within the period that such a claim could have been filed. Sec. 6512(b)(3)(B). The claim need not have actually been filed as long as it could have been filed on January 4, 1989. ⁴ Petitioners must show that the tax was paid within the periods applicable under section 6511(b)(2), (c), or (d), ⁵ which are expressly incorporated by reference into section 6512(b)(3)(B).

Section 6511(a) provides, generally, that a claim for credit or refund of an overpayment of tax must be filed by the taxpayer within three years from the time the return was filed or two years from the time the tax was paid, whichever period expires later. Section 6511(a) also expressly provides that if no return is filed, the claim must be filed within two years from the time the tax was paid. ⁶ While section 6511(a) provides the limitations periods for filing claims for credit or refund, section 6511(b), like section 6512(b), limits the amount of any such credit or refund.

Section 6511(b)(2) provides limitations on the amount of any credit or refund as follows:

(A) LIMIT WHERE CLAIM FILED WITHIN 3-YEAR PERIOD. -- If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately...