Estate of Smith v. Commissioner of Internal Revenue, 123 T.C. No. 2 (U.S.T.C. 7/13/2004), 19200-94.

Decision Date13 July 2004
Docket NumberNo. 19200-94.,19200-94.
Citation123 T.C. No. 2
CourtU.S. Tax Court

On Jan. 24, 2002, the Court entered a decision that there was an overpayment of $238,847.24 regarding E's estate tax liability, which amount was paid after the mailing of the notice of deficiency. That decision is now final. R issued refunds to E which were less than the overpayment amount and interest thereon. R alleges that the refund was less than the $238,847.24 overpayment and interest thereon because, after our decision became final, and pursuant to sec. 6402(a), I.R.C., he applied $85,336.83 of the $238,847.24 overpayment to assessed but unpaid interest that had accrued on E's estate tax deficiency prior to the date of payment (underpayment interest). E filed a motion to enforce our overpayment determination pursuant to sec. 6512(b)(2), I.R.C., and Rule 260, Tax Court Rules of Practice and Procedure.

Held: An overpayment means any payment of tax in excess of the tax which is properly due. For purposes of determining the amount of an overpayment, the term "tax" includes any underpayment interest due thereon. Thus, an overpayment by definition is the amount by which payments exceed the tax and interest for the period of underpayment.

Held, further, the amount of the refund should not have been reduced for underpayment interest because that interest was part of the tax amount that was required to be considered in determining the amount of the overpayment. Our final decision that there was a $238,847.24 overpayment precludes any remaining unpaid underpayment interest to which R could apply the overpayment. Held, further, sec. 6512(b)(4), I.R.C., which provides that this Court does not have jurisdiction to restrain or review the Commissioner's application of an overpayment pursuant to sec. 6402, I.R.C., to outstanding tax liabilities of the taxpayer who overpaid, does not apply where our final decision in the same case precludes the existence of the liabilities to which the Commissioner applied the overpayment. E is entitled to a refund of the $238,847.24 overpayment amount, plus interest thereon, less any refunds already made with respect to the overpayment.

Harold A. Chamberlain and Michael C. Riddle, for petitioner.

R. Scott Shieldes, for respondent.


RUWE, Judge:

This matter is before the Court pursuant to the estate's Motion for Proceeding To Enforce Overpayment Determination pursuant to Rule 260.1 Our jurisdiction to grant such relief is conferred by section 6512(b)(2).


In 1994, respondent issued a notice of deficiency determining an estate tax deficiency of $663,785 and an accuracy-related penalty under section 6662(a) of $132,785. The estate filed its petition with this Court seeking redetermination of the deficiency. In March 1998, after our first opinion and decision that there was a deficiency of $564,429.87, the estate paid $646,325.76 with respect to its estate tax. Our first decision was appealed and never became final. After many years of litigation,2 we entered a decision on January 24, 2002, that is now final. In our decision, we determined that the estate was due an "overpayment in estate tax in the amount of $238,847.24, which amount was paid after the mailing of the notice of deficiency".

Pertinent Dates and Information

Decedent died on November 16, 1990. The estate filed the estate tax return on July 12, 1991, and included with it a payment of $60,164.54, which was the tax liability reported on the return. On March 31, 1998, after our initial decision that there was a deficiency in the amount of $564,429.87, the estate remitted a $646,325.76 payment (advance payment). Respondent also credited the estate's estate tax liability with a 1992 income tax overpayment of $63,052. On May 12, 1998, respondent made a "quick assessment" of estate tax of $564,429.87 and deficiency interest thereon of $410,848.76.

On January 18, 2002, after our most recent opinion in this case, respondent filed respondent's computation for entry of decision (respondent's computation) along with a proposed decision. Counsel for both parties acknowledged that respondent's computation was in accordance with our opinion in Estate of Smith v. Commissioner, T.C. Memo. 2001-303, affd. 54 Fed. Appx. 413 (5th Cir. 2002). Based on that computation, the parties stipulated that we should enter a decision "that there is an overpayment in estate tax in the amount of $238,847.24, which amount was paid after the mailing of the notice of deficiency".3

On January 24, 2002, we entered our decision that there was a $238,847.24 overpayment of estate tax paid after the mailing of the notice of deficiency and that there was no penalty due from the estate under section 6662(a). That decision was appealed and affirmed and is now final. Sec. 7481(a).

Respondent's computation contained the following documents:

(1) Respondent's computation statement, the pertinent information of which is listed as follows:

                  Tax assessed and paid                            $624,594.41
                       July 12, 1991          $60,164.54
                       April 15, 1993          63,052.00
                       March 31, 1998         501,377.87
                         Total payments       624,594.41
                  Tax liability pursuant to mandate                 385,747.17
                  Overpayment                                       238,847.24
                  Penalty sec. 6662(a)                                 None

(2) Form 3614-A, Estate Tax, which recomputed in detail the estate's estate tax liability;

(3) Form 6180, Line Adjustment—Estate Tax, which recomputed in detail decedent's taxable estate (4) a detailed interest calculation which determined the estate's total Federal deficiency interest deduction as $209,943.54; and

(5) Form 3623, Statement of Account. For simplicity, the following table is an extraction of the information therein contained:

                Tax Interest
                  Revised liability                    $385,747.17           __
                  Assessment (tax on return)             60,164.54           __
                  Tax Court assessment (5/12/98)        564,429.87       $410,848.76
                  Total assessments                     624,594.41           __
                  (Decrease) in assessment             (238,847.24)
                  Revised liability                     385,747.17
                  Payment with return (7/12/91)          60,164.54
                  Credit transfer 1992 (4/15/93)         63,052.00
                  Advance payment1 (3/31/98)       501,377.87        144,947.89
                  Total payments                        624,594.41
                  (Overpayment)                        (238,847.24)

The interest referred to in this document is interest on the underpayment of tax that accrued prior to the estate's payment of $646,325.76 on March 31, 1998. Hereafter, we refer to interest accrued during that period as "underpayment interest". See Sunoco, Inc. & Subs. v. Commissioner, 122 T.C. 88 (2004).

On May 6, 2002, after our final decision, respondent abated $180,564.04 of the previously assessed underpayment interest and $238,847.24 of the previously assessed estate tax. On May 13, 2002, respondent issued to the estate a refund check of $210,467.35, consisting of a $153,510.41 refund for overpayment of estate tax and $56,956.94 in interest on that refunded amount. Respondent computed the $153,510.41 portion of the refund by subtracting $85,336.83 from the $238,847.24 overpayment amount in our final decision. According to respondent, the $85,336.83 was the amount of assessed but unpaid underpayment interest. On October 6, 2003, respondent abated $20,341.20 in underpayment interest. On October 6, 2003, respondent refunded $30,108.47 to the estate.4


In its motion, the estate argues that the amount refunded by respondent, $210,467.35 ($153,510.41 in overpaid estate taxes and $56,956.94 in interest on that amount) was incorrect. It is the estate's position that since this Court entered a decision that there was a $238,847.24 overpayment, it is this amount, plus interest thereon, which should be refunded to the estate. Accordingly, the estate seeks $85,336.83, the difference between $238,847.24 and $153,510.41, plus interest thereon.5 We ordered respondent to respond to the motion.

In response, respondent argues that at the time the Court's decision became final, the estate owed assessed and unpaid underpayment interest of $85,336.83. Respondent acknowledges that the estate's total payments exceed both the tax and interest regarding the estate tax liability but bases his argument on the allocations of the payments that respondent made between tax and interest. Respondent argues that he had originally, before the final decision, assessed underpayment interest in the amount of $410,848.76 and allocated $144,947.89 (from the $646,325.76, March 31, 1998, advance payment) to that underpayment interest. On the basis of the final decision, respondent explains that he abated $180,564.04 in underpayment interest. Thus, after all respondent's allocations and abatements, respondent alleges that $85,336.83 in underpayment interest remained unpaid. Respondent states that he subtracted this amount from the $238,847.24 overpayment that we determined, and he applied the $85,336.83 to assessed but unpaid interest pursuant to section 6402. This resulted in the May 13, 2002, refund of $210,467.35, which consisted of $153,510.41 ($238,847.24 minus $85,336.83) plus interest on the $153,510.41. Respondent argues that pursuant to section 6402(a) he is entitled to credit part of the $238,847.24 overpayment against interest that accrued on the unpaid estate tax for the period before the estate's $646,325.76 payment on March 31, 1998. Neither party cites any caselaw to support their respective positions. Both parties have submitted written arguments in support of their positions, and both state that they do not request a hearing on this matter.


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  • Smith v. Comm'r of Internal Revenue (In re Estate of Smith) , 19200–94.
    • United States
    • U.S. Tax Court
    • 13 d2 Julho d2 2004
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