Johnson v. Commissioner
| Decision Date | 29 November 1993 |
| Docket Number | Docket No. 13367-90. |
| Citation | 66 T.C.M. 1446 |
| Parties | Kenneth H. Johnson and Yoshiko Johnson v. Commissioner. |
| Court | U.S. Tax Court |
Donald D. DeGrasse, for the petitioners. Sheila Dansby Harvey, for the respondent.
Respondent determined a deficiency in petitioners' Federal income tax and additions to tax for 1983 as follows:
Additions to Tax
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Year Deficiency Sec. 6653(a)(1) Sec. 6653(a)(2) Sec. 6661
1983 $30,139 $1,507 1 $7,535
1 50 percent of the interest due on the entire deficiency
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 1983, and all Rule references are to the Tax Court Rules of Practice and Procedure. When petitioners filed their petition, they were residents of Missouri City, Texas.
This matter is before us on petitioners' motion for leave to amend their petition to assert that they are entitled to a $13,500 refund of Federal income tax. Respondent has objected. The underlying issue is whether a $30,000 remittance petitioners made to respondent as a deposit became a payment of tax for 1983 that we could order respondent to refund as an overpayment under section 6512(b). We hold that we lack jurisdiction to order the $13,500 refund requested by petitioners. We will therefore deny petitioners' motion for leave to amend.
In 1984, respondent commenced an audit of petitioners' Federal income tax returns for the taxable years 1981, 1982, and 1983. On January 9, 1985, petitioners deposited $30,000 with respondent in order to suspend the running of interest on any deficiency that might be determined for those years, stating "The amount is arbitrary since you have failed to make any preliminary finding known to me." On January 30, 1985, respondent acknowledged receipt of the deposit and notified petitioners that the deposit had been divided equally among the 3 years, $10,000 each to 1981, 1982, and 1983. Petitioners wrote back, asking that the deposit be applied "jointly" to the 3 years under audit, or, apparently in the alternative, to apply $13,500 to each of the years 1981 and 1982, and $3,000 to 1983. Petitioners never described what they meant by the term "jointly". However, they now argue that they wanted the entire $30,000 to be applied in such a manner that, if respondent should determine a deficiency for any of the 3 years, their account for that year would reflect the $30,000 deposit. On February 27, 1985, respondent sent petitioners a letter stating that the deposit had been applied "as you requested", but did not specifically state how the deposit had been applied.
On March 26, 1990, respondent mailed petitioners a statutory notice that determined a $30,139 income tax deficiency (plus additions to tax) for the taxable year 1983. Respondent did not and has not issued a statutory notice to petitioners for 1981 or 1982. On June 20, 1990, petitioners petitioned the Tax Court, seeking, among other relief, the refund, as an overpayment plus interest, of the $30,000 previously remitted.
On August 13, 1990, respondent refunded petitioners $13,500 of the $30,000 remittance, the amount applied to 1981, plus $9,942.34 in interest. In so doing, respondent treated this part of the remittance as a payment of tax with respect to the year 1981.1
On September 9, 1991, petitioners filed a claim for refund of the $13,500 apparently applied to 1982. On December 6, 1991, respondent denied this claim, on the ground that the statutory period of limitations for 1982 refunds had expired. Respondent's stated reason for denying petitioners' claim is consistent with respondent's having treated this part of the remittance as a payment of tax rather than as part of a deposit for the year 1982.
In summer 1991, petitioners and the IRS Appeals Office reached a settlement that there was no deficiency in petitioners' 1983 income tax. As a result of that agreement, the parties entered into a stipulation that petitioners had no deficiency, overpayment, or addition to tax for 1983, which the Court entered as its decision on September 6, 1991. After entry of decision, counsel for both parties agreed that petitioners had made a $3,000 deposit for 1983. On September 19, 1991, petitioners filed an uncontested Motion to Vacate Judgment in order to preserve their rights to receive the $3,000 of the remittance that had been applied to 1983. On September 23, 1991, the Court granted petitioners' motion, and the case was set for trial for March 23, 1992. Prior to trial, petitioners attempted to settle the case with respondent and to enter into a stipulated decision that they had no deficiencies or additions to tax but were entitled to a $3,000 refund.
While the case was pending before this Court, petitioners' representative persuaded the Internal Revenue Service Center in Austin, Texas, to return the $3,000 applied to 1983. On December 23, 1991, respondent refunded petitioners $3,000, plus $2,927.82 in interest, also treating this portion of the remittance as a payment of tax rather than a deposit.2 Petitioners did not at that time inform respondent's counsel they had received this refund.
At the call of the calendar on March 23, 1992, petitioners informed respondent that they no longer wished to settle for a $3,000 overpayment for 1983 because that amount had been already refunded. However, petitioners asserted that they were entitled to a refund of the remaining $13,500 allocated by respondent to 1982, plus interest, on the ground that their original $30,000 remittance should have been applied "jointly" to the 3 years under audit. Petitioners asserted that respondent had mistakenly applied only $3,000 of their remittance to their account for 1983.
On April 22, 1992, the Court filed petitioners' Motion for Leave to File Amended Petition, and the parties' stipulation of facts, petitioners' supporting memorandum, and respondent's objection and memorandum followed in due course. Petitioners' motion states that they "seek to amend their petition to claim only the balance of [the $30,000] overpayment in the amount of $13,500 plus interest."
On reflection, it is not clear why petitioners need to amend their petition to include a claim for refund of $13,500 plus interest. In their original petition, petitioners claimed they were due a $30,000 refund plus interest. The amended petition would do no more than reduce the amount of the overpayment and refund originally claimed in their petition. Nonetheless, the underlying issue we decide on this motion, whether we can order respondent to refund petitioners an overpayment of $13,500 or some lesser amount, plus interest, bears on whether we could grant petitioners the relief they would seek in their amended petition, as well as our authority to grant any part of the relief sought in their original petition.
Petitioners argue in their memorandum that their $30,000 remittance was a deposit, but that it became a payment of tax for 1983 when respondent issued the notice of deficiency for 1983, the only year for which respondent issued a notice of deficiency. Respondent has objected to petitioners' motion for leave to amend and now contends that the $30,000 remittance was originally a deposit, remained a deposit, and never became a payment of tax for any of the years under audit. Respondent accordingly argues that the Court has no jurisdiction to order a refund of the $13,500 because, as a deposit, it is not subject to our overpayment jurisdiction under section 6512(b). Respondent argues in the alternative that if the $13,500 has ever become a payment, it was a payment for 1982, a taxable year over which we have no jurisdiction. Nonetheless, respondent is prepared to refund petitioners $629.84, which is the remaining part of the $30,000 that respondent has not refunded, after taking into account the $12,870.16 in interest petitioners received, but which respondent now argues they were not entitled to, on the ground that the remittance never became a payment.3 For the reasons discussed below we will deny petitioners' motion for leave to amend their petition.
Both sides in this matter have been guilty of inconsistencies and shifts of position. All administrative action by respondent has been consistent with the view that petitioners' remittance was or became a payment or series of payments of tax. Respondent now argues that the remittance has always been and continues to be a deposit over which this Court has no jurisdiction to order a refund. Petitioners' initial position was never clear, and they have backed and filled and made a series of tacking maneuvers in a belated effort to recover the entire $30,000 as an overpayment on which they are entitled to interest. Petitioners and respondent agreed that there was no overpayment or deficiency with respect to 1983, but the decision to that effect has been vacated, apparently to give petitioners the opportunity to recover $3,000 of the remittance. That having been accomplished, petitioners now seek a much greater amount, the $13,500, which respondent appears to acknowledge their right to do, without holding them to their prior agreement. We will therefore address the parties' arguments as they have presented them on this motion.
Issue 1. Jurisdiction To Order Refund
Rule 41(a) provides, in part, that
A party may amend a pleading once as a matter of course at any time before a responsive pleading is served. * * * Otherwise a party may amend a pleading only by leave of Court or by written consent of the adverse party, and leave shall be given freely when justice so requires. No amendment shall be allowed after expiration of the time for filing the petition, however, which would involve conferring jurisdiction on the Court over a matter which otherwise would not come within its jurisdiction under...
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