Dowell v. Commissioner

• Decision Date: 20 November 1980
• Docket Number: Docket No. 2150-75.
• Citation: 1980 TC Memo 515,41 TCM (CCH) 390
• Parties: Alfonzo L. Dowell and Vivian T. Dowell v. Commissioner.
• Court: U.S. Tax Court

41 TCM (CCH) 390

1980 TC Memo 515

T.C. Memo. 1980-515.

Alfonzo L. Dowell and Vivian T. Dowell v. Commissioner.

Docket No. 2150-75.

United States Tax Court.

Filed November 20, 1980.

Stephen Jones, 1100 Broadway Tower, P.O. Box 3339, Enid, Okla., Julius M. Greisman, and Nancy S. Abramowitz, for the petitioners. William D. Brackett, for the respondent.

Memorandum Opinion

TIETJENS, Judge:

This case is on remand from the Court of Appeals for the Tenth Circuit. The circuit court, 614 F. 2d 1263 (1980), reversing our decision in 68 T.C. 646 (1977), held that the filing of a nonfraudulent amended return starts the running of the statute of limitations under section 6501(a)¹ and that respondent's notice of deficiency for the years 1963 through 1966, mailed over six years after the filing of petitioners' amended nonfraudulent returns, was therefore untimely. Petitioners filed a motion for this Court to enter a decision that no deficiency exists for 1965 and that petitioners are entitled to refunds for the following overpayments:

                  Year                     Overpayment
                  1963 .................... $2,579.18
                  1964 ....................  3,703.76
                  1966 ....................  2,027.38
                

Respondent objected to petitioners' Motion for Entry of Decision and filed a motion urging us to enter a decision that there are no deficiencies due from nor overpayments due to petitioners for the taxable years 1963 through 1966. The sole issue for our determination at this time is whether petitioners are entitled to overpayments for 1963, 1964, and 1966.

The facts of this case are fully stipulated. Most of the facts relevant to this issue appear in our earlier decision but for the sake of clarity and continuity, we will repeat them briefly as well as newly enunciate those facts in the stipulated record that are only pertinent here.

Petitioners filed fraudulent original returns for 1963 through 1966 which showed the following tax liabilities:

                  Year                      Liability
                  1963 ..................... $160.13
                  1964 .....................   59.63
                  1965 .....................   80.04
                  1966 .....................  339.23
                

On September 13, 1968 for the years 1965 and 1966 and on November 25, 1968 for the years 1963 and 1964, petitioners filed amended nonfraudulent returns which showed the following additional tax liabilities.

                                            Additional
                  Year                      Liability
                  1963 .................... $2,579.18
                  1964 ....................  3,703.76
                  1965 ....................  2,111.33
                  1966 ....................  2,027.38
                

Attached to petitioners' amended returns were remittances for these amounts and each amended return is marked "Received with Remittance" by the Internal Revenue Service.

A statement identical in all material respects to the following was attached to each of petitioners' amended returns:

Payment attached to this amended 1963 return, is hereby made under protest. We feel that the amount of deposits in question represents funds received for political purposes and gifts. These funds were used for political purposes.

We hope and feel that eventually we will be able to get a more precise record of these funds.

On December 11, 1974, respondent mailed petitioners a notice of deficiency. In the statement schedule, only the additional amount of $2,111.33 submitted with petitioners' 1965 amended return is shown as having been credited to petitioners' account. The remaining $8,310.32 which was submitted with petitioners' amended returns for 1963, 1964, and 1966 was not so applied; rather, these remittances were held by respondent in a suspense account.

In petitioners' petition filed with this Court on March 11, 1975, petitioners include among facts upon which they rely as the basis for their case the assertion that:

5C. The amended delinquent returns for the four years were submitted with cash remittances of $8,310.32. The remittances submitted with the returns were not credited to other tax deficiencies which the Internal Revenue Service has since taken collection action on and it has been necessary for the taxpayers to make payment in full of these other liabilities, the Commissioner having applied, prior to any notice of deficiency, the cash remittances accompanying the amended delinquent returns as being tax paid that applies to the tax liability indicated on said amended delinquent returns, all in accord with the income tax self-assessment system.

In their reply submitted to this Court on June 2, 1975, petitioners maintained:

5. AS TO RETURNS FILED UNDER PROTEST:

A. The allegation in paragraph 5.B. of the Respondent's Answer alleges that the amended returns for the years 1963, 1964, 1965, and 1966 were filed under protest is not true. These returns were not filed under protest. Payment of the tax was made under protest in that the tax advisor obviously had a concern over prior tax law that required payment to be made under protest as a requisite to a later refund claim.

Finally, in the stipulation of facts, the parties stipulated that:

25. Petitioners do not contest respondent's determination of taxable income and income tax liabilities, together with additions to the taxes, for their taxable years 1963, 1964, 1965, and 1966, as set forth in the statutory notice of deficiency.

Petitioners maintain that the remittances are overpayments which this Court has jurisdiction to refund to them. Their argument is rooted in their interpretation of Rosenman v. United States, 323 U.S. 658 (1945) that there is no payment upon a remittance to a suspense account. Petitioners assert that since respondent placed $8,310.32 in a suspense account and did not assess petitioners' 1963, 1964, and 1966 amended returns until September 26, 1977, payment was not made until that time.

Respondent, by contrast, contends that the remittances attached to petitioners' amended returns were payments in 1968 because petitioners intended to satisfy defined tax liabilities. If the remittances are held to be payments, respondent proceeds with his argument, since they are not in excess of petitioners' tax liabilities, were not erroneously or illegally collected, and did not cause the Government to be enriched unjustly, respondent can retain the remittances. Finally, respondent argues that the amounts shown on the face of the amended returns are not to be reduced by reason of the statements of protest attached to the returns.

We hold for the respondent.

Section 6512(b)(1) confers jurisdiction on this Court to determine an overpayment which is refundable to the taxpayer when the Tax Court decision becomes final.² Section 6512(b)(2) limits this amount to only that portion paid either after the deficiency notice was mailed, or within the period of limitations for filing a refund claim under section 6511(b)(2), (c), (d), or (g) which could have been refundable if on the date the notice of deficiency was mailed a claim had been filed, or under certain specified conditions where a timely refund claim was actually filed. In the instant case, therefore, since no refund claim was ever filed, we may only determine the existence of an overpayment refundable to petitioners if we find that the remittances were payments after December 11, 1972.³

The record shows that petitioners' 1963, 1964 and 1966 returns were "assessed" on September 26, 1977.⁴ We have repeatedly held, however, that an assessment is not a prerequisite to a payment.⁵Fortugno v. Commissioner Dec. 26,411, 41 T.C. 316 (1963), affd. 65-2 USTC ¶ 9748 353 F. 2d 429 (3d Cir. 1965); Draper v. Commissioner, 32 T.C. 545 (1959); Arheit v. Commissioner Dec. 23,204, 31 T.C. 46 (1958).

Where there has been no assessment, the test we have applied to determine when payment has been made is one drawn from Rosenman v. United States, supra. See, e.g. Fortugno v. Commissioner, supra; Lewyt Corp. v. Commissioner Dec. 19,225, 18 T.C. 1245 (1952), affd. 54-2 USTC ¶ 9496 215 F. 2d 518 (2d Cir. 1954).

The Supreme Court, in Rosenman, held that a taxpayer's remittance which is coupled with a clear statement that the money was intended solely to avoid the accumulation of interest and penalties and which the Government placed in a suspense account does not constitute a payment.⁶ Petitioners would have us read Rosenman as creating a rule that we look only to respondent's actions to determine the time a remittance becomes a payment. Petitioners argue that a taxpayer's "intentions in making a remittance are not controlling; at most they may bear upon what the Commissioner does with such remittance." Respondent, however, urges us to accept the converse: that petitioners' intent is the critical factor in determining when a payment is made and that respondent's acts are of lesser significance.

In Rosenman, there was a correspondence between the taxpayer's express intent to make a deposit and not a payment and the Commissioner's placing the remittance in a supsense account. Here, where there is no clear direction by the taxpayer that the remittance was made solely to avoid interest and penalties and where both petitioners' and resopndent's actions have been inconsistent,⁷ the parties wish us to decide the pivotal element of the two factors present in Rosenman.

We hold that it is a taxpayer's intentions which control the determination of whether a remittance is a deposit or a payment.⁸ Although our decisions on this issue have sometimes referred to respondent's actions, we have always given his actions secondary emphasis and have used them as a means to interpret a taxpayer's intent. See, e.g., Fortugno v. Commissioner, supra.

Indeed, the Court of Appeals for the Tenth Circuit, to which an appeal in this case would lie, has indicated its position is consonant with the test we are applying herein.⁹ In United States v. Miller 63-1 USTC ¶ 9374, 315 F. 2d 354, 356 (10th Cir. 1963), a case involving payment of estimated taxes, the court stated:

The manner in which the two checks were handled in

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