Estate of Schneider v. Comm'r of Internal Revenue

Decision Date06 November 1989
Docket NumberDocket No. 6234-79.
PartiesESTATE OF AL J. SCHNEIDER, DONALD J. SCHNEIDER, ET AL., PERSONAL REPRESENTATIVES, AND AGNES SCHNEIDER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Our decision for respondent on the controverted issues in an income tax case (88 T.C. 906 (1987)) was affirmed on appeal (855 F.2d 435 (CA7 1988)). Respondent asks us to liquidate the appeal bond (sec. 7485, I.R.C. 1986) and pay the proceeds to him. Petitioners claim an offset on account of the petitioner estate's apparent overpayment of estate tax, under the doctrine of equitable recoupment.

HELD: (1) We do not have jurisdiction to decide petitioners' claim of equitable recoupment.

(2) Petitioners' claim of equitable recoupment does not reduce the amount of their liability that is secured by the appeal bond. Robert E. Nelson, Arthur Kaftan, and Brian R. Mudd, for the petitioners.

Richard G. Goldman and Terry W. Vincent, for the respondent.

OPINION

CHABOT, JUDGE:

This matter is before us on respondent's Motion for Liquidation and Distribution of Collateral for Satisfaction of Liability Secured by Appeal Bond.

The instant case deals with respondent's determination of deficiencies in Federal individual income taxes for 1975 and 1976 against Al J. Schneider and Agnes Schneider. After the trial of this case, Al J. Schneider (hereinafter sometimes referred to as ‘decedent‘) died and his estate was substituted as petitioner.

In our opinion in Estate of Schneider v. Commissioner, 88 T.C. 906 (1987), we held for respondent on the controverted issues. Decision was entered for income tax deficiencies of $17,046 and $20,716 for 1975 and 1976, respectively.

Petitioners appealed our decision and, on October 6, 1987, filed a bond in the amount of $80,000. See section 7485. 1 Our decision was affirmed by the Court of Appeals for the Seventh Circuit. 855 F.2d 435 (CA7 1988).

It is represented to the Court that decedent's estate tax liability was settled between the estate and respondent, without consideration being given to any deduction allowable as a claim against the estate on account of deficiencies for 1975 and 1976 income taxes. It is further represented to the Court that (1) such a claim would reduce the estate tax liability by more than $15,000; (2) the statute of limitations has run on filing any claim for refund of the estate tax and no such claim was timely filed; (3) petitioners' 1975 and 1976 income tax deficiencies have been assessed and respondent has given notice and demand for payment; and (4) the 1975 income tax deficiency was paid in full on October 5, 1989, and the amount owed on account of the 1976 income tax deficiency, including interest, is less than the $80,000 face amount of the bond.

Respondent contends that petitioners have refused to pay their 1975 and 1976 income tax deficiencies, 2 that petitioners are not entitled to the benefit of equitable recoupment in this Court and in general, and that respondent should be allowed to collect on the bond that had been posted to stay collection pending appeal.

Petitioners seek application of the doctrine of equitable recoupment, under which a claim for a refund of taxes barred by a statute of limitations may nevertheless be recouped against a tax claim of the Government. Bull v. United States, 295 U.S. 247 (1935). See Black's Law Dictionary (5th ed. 1979) at 484. Petitioner assert that ‘The Estate has consistently evidenced a willingness to pay * * * [the 1975 and 1976] income tax deficiencies * * * if the Internal Revenue Service would give the Estate credit for the reduction in federal estate tax under the doctrine of recoupment.‘ Petitioners contend that they have satisfied all the requirements for equitable recoupment and are entitled to have that doctrine applied on their behalf in the instant case.

We agree with respondent.

Petitioners invoked this Court's jurisdiction to redetermine the deficiencies that respondent had determined in petitioners' 1975 and 1976 income taxes. We exercised our jurisdiction, entered our decision, and saw our decision affirmed. That decision has now become final. Sec. 7481. We are not asked to vacate that decision, or to grant ancillary relief under any of the provisions that the Congress has enacted (see, e.g., secs. 7481(c) and (d)). Thus, the jurisdiction that was invoked has been exercised and nothing remains for us to do in the instant case as to the amounts of petitioners' 1975 and 1976 income tax deficiencies.

In the instant case, the claim for application of the doctrine of equitable recoupment came after we redetermined the deficiencies. It is clear that, even if the matter had been raised at an earlier stage, we would not have jurisdiction to consider the doctrine. In order to consider the doctrine, presumably as an affirmative defense to respondent's determinations in the notice of deficiency, we would have had to determine (among other matters) whether there was an overpayment of decedent's estate's estate tax. We do not have authority to determine such an overpayment, absent an estate tax notice of deficiency and a timely petition from that notice of deficiency. Estate of Van Winkle v. Commissioner, 51 T.C. 994, 999- 1000 (1969). See Commissioner v. Gooch Co., 320 U.S. 418, 421 (1943). See also Commissioner v. McCoy, 484 U.S. 3 (1987). Consequently, we do not have authority to apply equitable recoupment in the instant case.

We do have authority, under section 6214(b), to consider facts relating to other taxable periods insofar as they may affect the income tax deficiencies before us. However, no contention is made that the estate tax liability has any effect on petitioners' income tax liability for either of the years before us. See Commissioner v. Gooch Co., 320 U.S. at 420-421.

Decedent's estate filed an appeal bond in the amount of $80,000 on October 6, 1987. Under section 7485(a) 3 the effect of this appeal bond was to stay assessment and collection of the 1975 and 1976 income tax deficiencies after entry of our decision, until our decision became final. Our decision...

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4 cases
  • United States v. Dalm
    • United States
    • U.S. Supreme Court
    • 20 d2 Março d2 1990
    ...Cum.Bull. 404, 405 ("[T]he Tax Court lacks jurisdiction to consider a plea of equitable recoupment"); see also Estate of Schneider v. Commissioner, 93 T.C. 568 (1989). In Rothensies v. Electric Storage Battery Co., 329 U.S. 296, 303, 67 S.Ct. 271, 274, 91 L.Ed. 296 (1946), we cited Commissi......
  • Mueller v. Comm'r of Internal Revenue (In re Estate of Mueller)
    • United States
    • U.S. Tax Court
    • 13 d1 Dezembro d1 1993
    ...that we have consistently adhered to the view that we lack jurisdiction to apply equitable recoupment. See, e.g., Estate of Schneider v. Commissioner, 93 T.C. 568, 570 (1989); Phillips Petroleum Co. v. Commissioner, 92 T.C. 885, 888–890 (1989); Poinier v. Commissioner, 86 T.C. 478, 490–491 ......
  • Estate of Orenstein v. Commissioner, Docket No. 25687-85.
    • United States
    • U.S. Tax Court
    • 26 d3 Abril d3 2000
    ...v. Commissioner, supra, we adhered to the view that we lack jurisdiction to apply equitable recoupment. See Estate of Schneider v. Commissioner [Dec. 46,143], 93 T.C. 568, 570 (1989); Phillips Petroleum Co. v. Commissioner [Dec. 45,667], 92 T.C. 885, 889-890 (1989); Estate of Van Winkle v. ......
  • Poinier v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • 7 d1 Janeiro d1 1991
    ...a taxpayer's obligation -- a procedure which the Court has traditionally and routinely followed. See, e.g., Estate of Schneider v. Commissioner, 93 T.C. 568 (1989). The cases cited by respondent, which stand for the proposition that we lack jurisdiction to reopen our decisions which have be......

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