T.C. M em o . 2 0 1 7 -7 5

UNITED STATES TAX COURT

PANAGIOTA PAM SOTIROPOULOS, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 9 8 84 -1 2
. Fi l edM ay 1 , 2 0 1 7
.

J effreyL. Go u l d , fo r p et i t i on er. Sco t t A. Ho v ey , fo r res p o n d en t
.

M EM ORANDUM OPINION LAUBER, J u d g e: Sect i o n 9 0 1 (a) p erm i ts a U.S. ci t i zen o r res i d en tt o cl ai m a cred i tfo r i nco m e t ax p ai dt o a fo rei g n co u n t ry . 1 If t h e fo rei g n t ax p ai d i s l at er

1 Al l s t atut o ry

referen ces are t o th e In t ern al Rev en u e Co de (Co d e) i n effect fo r t h e t ax y ears i n i s s u e, an dal l Ru l e referen ces are t o th e Tax Co u rt Ru l es o f Pract i ce an d Pro cedu re. W e ro u n dal l m o n et ary am o u nt s t o th e n eares td o ll ar.- 2
-

[* 2 ] “ refu n d edi n wh o l e o r i n p art ,” t h e t ax pay er i s req u i red t o n o t i fy th e Secret ary , “ wh o s h al l red et erm i n e t h e am o u n to f t h e t ax fo r t h e y ear o r y ears affect ed .” Sec. 9 0 5(c)(1 )(C). An y U.S. t ax du e as a res u l to f t h e Secret ary ’ s red et erm i n at i o n i s n o ts ub jectt o d efi ci en cy p ro cedu res b u t“ s h al l b e p ai db y th e t ax p ay er o n n o t i ce
an d d em an db y

th e Secret ary .” Sec. 9 0 5 (c)(3 ); s ee s ec. 6 2 1 3 (h )(2 )(A). Pet i t i o ner i s a U.S. ci t i zen wh o l i v edan dwo rk edi n t h e Un i t edKi ng d o m . On h er Fed eral i nco m e t ax return s fo r 2 0 03 -2 0 0 5, s h e cl ai m edfo rei g n t ax cred i t s b as edo n th e am ou n t s o f U.K. i n co m e t ax wi th hel dfro m h er wag es b y

h er em p l o y er. Her U.K. i n co m e t ax retu rn s fo r t h e rel ev an tp eri o ds , h o wev er, s h o wedl arg e
o v erp aym en ts . Sh e ap p l i edt o h av e t h o s e o v erp aym en t s retu rn edt o h er, an dth e U.K. Go v ern m en t du l y

reb at edt o h er s ub s t an t i al l y al l o f t h e t ax th ath adb een wi t h h el dfro m

h er wag es . Pet i t i o n er co nt en d edth atth es e s u m s h adn o tb een “ refu n d ed ” b ecau s e h er u l t i m at e en t i t l em en tt o refu n ds rem ai n edu n der i nv es t i g at i o n i n the Un i t edKi n gd o m . Sh e acco rd i n g l y d i dn o tn o t i fy

th e Secret ary

(b y fi l i n g
am en d edretu rn s o r o t h erwi s e) p u rs u an tt o s ect i o n 9 0 5 (c)(1 ). Fo l l owi n g ex am in at i o n o f p et it i o n er’ s 2 0 0 3 -2 0 0 5 ret u rn s , th e In t ern al Rev en u e Serv ice (IRS o r res p o n den t ) i s s uedh er a n o t i ce o f d efi ci en cy . Inthatn o t i ce t h e IRS d et erm i n edth atth e U.K. t ax es s he p ai dh adb een “ refu n d ed ” an dreco m p u t edh er fo rei g n t ax cred i t s acco rd i n g l y ; t h e IRS al s o d et erm i nedfo r each y ear an- 3
-

[* 3 ] accu racy -rel at edp en al ty u n d er s ect i o n 6 6 62 (a). Aft er t h e cas e was d o ck et ed i n thi s Co u rt , res p o n d en tm o v edt o d i s m i s s fo r l acko f ju ri s d ict i o n . He co n t en d ed i n that m o t i o n t h at he h aderred i n i s s u i n g th e n o ti ce o f d efi ci en cy ; th atth i s cas e i s
n o ts ub jectt o d efi ci en cy

p ro cedu res ; an d t h ats ect i o n 9 0 5 (c) au t ho ri zedh i m t o red et erm i n e p et it i o n er’ s 2 0 03 -2 0 0 5 t ax an dco l l ecti tfro m h er up o n n o t ice an dd em an d
. In So t iro po ul o s v . Co m m i s s i o n er (So t i ro po u l o s I), 1 42 T.C. 2 6 9 (2 0 1 4 ), we h el dth atth i s Co u rth as juri s d i ct i o n t o d et erm i n e, ata m i n i m u m , wh et h er s ect i o n 9 0 5 (c), t h e s tatu t o ry

p ro v is i o n al l eg ed t o d i v es tu s o f ju ri sd i ct i o n , ap p l i es . W e t h u s h el dth atwe h av e ju ri s d i ct i o n t o d et erm i n e wh et h er t h e U.K. t ax es p et i t i o n er p ai dwere “ refu nd edi n wh o l e o r i n p art ” wi t h in th e m ean i n g t h e s t atu t e. Res p o n d en t s ub s eq u en t l y

m ov edfo r p art i al s u m

m ary ju d g m en to n t h i s qu es t i on . Co n cl u d i n g as we d o th atth e U.K. t ax es i n qu es t i o n were i n deed “ refu n ded ” t o p et i t i o n er, we wi l l g ran tres p o nd en t ’ s m o ti o n , wi t h t h e co ro l l ary th atth i s cas e m

u s t b e d i sm i s s edi n s o far as i t co n cern s th e fo rei g n t ax cred i tad ju st m en t s p ro p erl y s ub

jectt o red et erm i n at i o n b y

th e Secret ary

u n d er s ect i o n 9 05 (c)(1 ). Back gro u n d Th e p art i es fi l eda s t ip ul at i o n o f fact s th ati s i n co rp o rat edb y th i s referen ce. Th e fo l l o wi n g fact s are d eri v edfro m th ats t i p u l at i o n , am

p l i fi edas n eces s ary

b y th e- 4
-

[* 4 ] p art i es ’ p l ead i ng s , m o ti o n p ap ers , an dth e ex h i b i t s an dd ecl arat i o n s at t ach ed t h eret o . Pet i t i o n er res i d edi n Lo n do n , En g l an d , wh en s h e fi l edh er p et it i o n . Pet i t i o ner i s a U.S. ci t i zen wh o l i v edi n Lo n d o n , En g l an d , duri n g 2 00 2
- 2 0 0 6
. 2 Sh e was em

pl o y edb y th e Lo n d on o ffi ce o f Go l d m anSach s atal l rel ev an t t i m es . As a U.K. res i d en t wo rk i n g i n th e Un i t edKi n gd o m s he was s ub jectt o U.K. i n co m e t ax . Sh e recei v edem p l o y ee co m

pen sat i on fro m

Go l d m anSach s , wh i ch wi t h h el dU.K. i n co m e t ax fro m h er wag es . Th e wi t h h el dt ax es , d en o m i n at ed“ Pay
as y o uEarn ” o r “ PAYE” t ax es , co ns t i tu t ed p rep aym en t s o f U.K. i n co m e t ax . Du ri n g 2 0 0 2 -2 0 0 6 p et it i o n er m ad e s ub s t an t i al i n v es t m en t s i n U.K. fi l m p art n ers hi p s th atu s ed s tru ctu redtran s act i on s t o g en erat e l arg e p u rp o rt ed d edu ct i on s fo r U.K. t ax p u rp o ses . Fo r each y ear s h e fi l eda U.K. i n co m e t ax retu rn refl ect i n g (am o n g o t h er t h i n g s ) h er es t i m at ed s hare o f t h e fi l m p art ners h i p s ’ d edu ct i on s an dl o s s es . Aft er recei v in g fi n al i n fo rm at io n fro m th e p art n ers h ip s , s h e fi l ed
am en d edU.K. retu rn s rev i s i n g th o s e es t im at es . Des p i t e h er U.K. res id en cy , p et i ti o n er as a U.S. ci t i zen was req u i redt o fi l e Fed eral i nco m e t ax return s fo r t h e y ears ati s s u e. Fo r U.S. p u rp os es s h e h as al

2 Fo r U.K. t ax p u rp o s es p et i ti o n er rep o rt edo n t h e b as i s o f a fi s cal y ear en d

i n g Ap ri l 5 . Fo r p u rp o s es o f d et erm i n i n g h er co rrectU.S. t ax l i ab i l it i es fo r 2 0 0 3
- 2 0 0 5 , th erefo re, t he rel ev an tU.K. t ax y ears are h er 2 0 0 2 -2 0 06 fi s cal y ears .- 5
-

[* 5 ] way s b een a cal en d ar y ear, cas h b as is t ax p ay er. Sh e fi ledt i m el y retu rn s o n Fo rm s 1 0 4 0 , U.S. In d i v i du al In co m e Tax Retu rn , fo r 2 0 0 3 , 2 0 04 , an d2 0 0 5
. On each U.S. retu rn p et i t i o n er el ect edt o cl ai m a fo rei g n t ax cred it u nd er
s ect i on 9 0 1 (a). Fo r each y ear s h e cl ai m eda cred i tb as edo n th e am o u n t o f U.K. i n co m e t ax wi t h h el dfro m h er wag es b y

Go ld m an Sach s. Fo r 2 00 3 , 2 0 0 4 , an d 2 0 0 5 s h e rep ort edh av i n g p ai d , v i a wag e wi t h h o l d i n g, U.K. i n co m e t ax o f $ 2 8 3 ,9 1 0 , $ 22 1 ,3 1 8 , an d$ 2 3 7 ,8 8 2 , res p ect i v el y . 3 Aft er co m p u t i n g v ari o u s l i m i

t at i o n s o n th e al l o wab l e cred i t s , s he cl ai m ed o n h er 2 0 0 3 , 2 0 0 4 , an d2 0 0 5 retu rn s fo rei gn t ax cred it s o f $ 2 0 2,8 5 5 , $ 1 3 4 ,4 2 0 , an d$ 1 6 2,1 8 2 , res p ect i vel y . 4 Sh e d i d
n o trep o rto n h er U.S. ret u rn s an y l o s s es o r o th er i t em s at t ri b u t ab l e t o t he U.K. fi lm p art n ers h i p s. Pet i t i o ner’ s o ri g i n al an dam en dedU.K. retu rn s fo r t h e rel ev an t y ears
s h o wedl arg e o v erp aym en t s , at t ri b u t ab l e ch i efl y t o l o s s es fro m

the U.K. fi l m

p art 3 Res p o n d en tco n vert edam o u n t s p ai di n Bri t i s h p o u n d s i n t o d o l l ars atwh at res p o n d en t d et erm i nedt o b e t h e ap p l i cab l e ex ch an g e rat e. Al t h o ug h t he co rrect nes s o f res p o nd en t ’ s cu rren cy co n v ers i o n s i s i m

m at eri al fo r p u rp o ses o f d eci d

i n g th e i n s t an tm o t i o n fo r p art ial s u m m ary ju dg m en t , i t co u l db e rel ev an tfo r co m p u t i n g an y

p en al t y u l t im at el y

d et erm i n edt o b e du e. 4 Sect i o n 9 0 5 (a) al l o ws a cas h b as i s t ax p ay er t h e o p t io n o f cl ai m i n g a fo rei g n t ax cred i t , s ub

jectt o cert ai n l i m i t at i o n s , “ in th e y ear i n wh ich th e t ax es o f th e fo rei gn co u n t ry * * * accru ed .” Pet i t i o n er d i dn o tex erci s e t hi s o p t i o n . Rat h er, s h e cl ai m edfo r each y ear a cred i tb as edo n t h e PAYE t ax es wi t h h el di n cas h fro m h er wag es b y

Go l d m an Sach s .- 6
-

[* 6 ] n ers h i p s . Pet i t i o n er ap p l i edt o Her M ajes t y ’ s Rev en u e an d Cu s t o m s (HM RC), t h e U.K. t ax i n g au t h o ri t y , t o h av e t h es e o verp aym en t s return edt o h er. HM RC co m

p l i ed wi t h h er req u es tan dreb at edt o h er s ubs t an ti al l y al l o f t h e U.K. i n co m e t ax th ath adb een wi t h h el dfro m h er wag es . Pet i t i o ner d i dn o tn o t i fy

th e IRS, b y

fi l i n g am en d edretu rn s o r o th erwi s e, t h atth e U.K. t ax es fo r wh i ch s he h adcl ai m edcred i ts h adb een “ refu nd edi n wh o le
o r i n p art .” See s ec. 9 0 5 (c)(1 )(C). Th e IRS n ev ert h el es s as cert ai n edth ro u g h i n fo rm at i o n s h ari n g th at p et i t io n er h adi n v es t edi n U.K. fi l m p art n ers h i p s ; th ats h e h ad cl ai m eds ub s t an ti al d edu ct i o n s at t ri b u tab l e t h eret o ; an dth ats h e h adfi ledU.K. retu rn s req u es t i n g refu nd s . Up o n ex am i nat i on o f h er 2 00 3 -2 00 5 retu rn s th e IRS d et erm i n edth ats h e h adrecei v edU.K. i n co m e t ax refu n d s o f $ 4 13 ,1 2 6 i n 2 0 0 3 , $ 2 9 2 ,6 6 3 i n 2 0 0 4 , an d$ 2 39 ,2 02 i n 2 0 0 5 . Itth erefo re d is al lo wedwh ati td et erm i n ed t o b e ap p ro p ri at e am o u n t s o f h er cl ai m edfo rei g n t ax cred i t s . Rat h er t h ani n v o k i n g s ect i o n 9 0 5 (c)(3 ) as au t ho ri t y fo r co ll ect i n g th e red et erm i n edt ax up o n n o t ice an dd em an d , th e IRS s en t p et i t i o n er a n o t i ce o f d efi ci en cy fo r 2 0 0 3 -2 0 0 5 . Th e redu ct io n s t o p et i t i o n er’ s fo rei g n t ax cred it s were t he o n l y ad ju s t m en t s refl ect edi n t h e n o t i ce o f d efi ci en cy . Th atn o t i ce d et erm in edt ax d efi

ci en ci es an d accu racy -rel at edp en al t i es as fo l lo ws :- 7
-

[* 7 ] Pen al t y

Year Defi ci en cy s ec. 6 6 6 2(a) 2 00 3 $ 1 3 5,2 5 0 $ 2 7,0 5 0 2 00 4 1 2 7 ,3 6 6 2 5 ,4 73 2 00 5 1 4 0 ,8 4 8 2 8 ,1 70 Pet i t i o ner t i m el y

p et it i o n edth i s Co u rtfo r red et erm in at i o n o f t h e d efi ci en ci es an dp en al t i es . Ap p ro x im at el y o n e y ear aft er fi l i n g h i s an swer, res po n d en t
m o vedt o d i s m i s s thi s cas e fo r l acko f juri s d i ct i o n i n s o far as i t co ncern s th e ad ju s t m en t s t o p et i t i o n er’ s fo rei g n t ax cred i t s . Res p o n d en ts ubm i t t edth ath e h aderred i n i ss u i ng th e n o t ice o f d efi ci en cy ; th at s ect io n 9 05 (c) au th o ri zedh im t o red et erm i n e t h e am o u n t o f p et i ti o n er’ s 2 0 0 3 -2 0 0 5 t ax an d co l l ecti t up o n n o t i ce an dd em an d ; an dth atfo rei g n t ax cred i tad ju s t m en t s o f t h e s o rt i n v o l vedh ere “ are ex p res s l y rem o v edfro m

d efi ci en cy

p ro cedures ” b y

a cro s s -referen ce fro m

s ect i o n 6 2 1 3 (h )(2 )(A) t o s ect i o n 9 0 5 (c). In So t iro po ul o s I we n ot edth e wel l -s et t l edru l e t hat“ [t ] h i s Co u rtal way s h as ju ri s d i ct i o n t o d et erm i ne wh eth er i th as ju ri s d i ct i o n .” 1 4 2 T.C. at2 7 2 (ci t i n g Co o p er v . Co m

m is s i o n er, 1 3 5 T.C. 7 0 , 7 3 (2 0 1 0 )). W e co n cl u dedth atwe h av e ju ri s d i ct i o n , ata m i n im

u m , “ t o d eci d e wh et h er t h e s t atu t o ry p ro v i s i o n al l eg edt o d i v es tu s o f ju ri s d ict i o n ap p l i es , i .e., wh et h er t h e U.K. t ax es p ai db y p et i ti o n er h av e b een ‘ refu n d edi n wh o l e o r i n p art ’ wi t h i n th e m ean i n g o f s ect i o n- 8
-

[* 8 ] 9 0 5 (c)(1 )(C).” Id . at2 7 9 . W e n o tedth atthi s as s u m p t i o n o f ju ri s d i ct i o n
wo u l daffo rdp et i t i on er a p rep aym en tfo ru m fo r res o l v i n g “ t h e cen t ral i s su e t h at
s h e rai s es o n t h e m eri t s , n am el y , th at t h e am o u nt s s h e recei v edfro m U.K. t ax i n g
au t h o ri t ies * * * were n o t ‘ refu n d s . ’ ” Id
. Di s cu ss i o n A. Su m

m ary J u d g m en t St an d ard Th e p u rp os e o f s u m

m ary ju d g m en t i s t o ex p ed it e l i t i g at i o n an d av o i dco st l y , t i m e-co n s u m i n g , an du n n eces s ary tri al s . Fl a. Peach Co rp . v . Co m m i s si on er, 9 0 T.C. 6 7 8 , 6 8 1 (1 9 8 8 ). Th e Co urtm ay g ran t s umm ary

ju d g m en t“ up o n al l o r an y p arto f t he l eg al i s s u es i n co n t ro v ers y ” wh enthere i s n o g en u i n e d i s pu t e as t o an y
m at eri al fact an da d eci s i o n m ay b e ren d ered as a m at t er o f l aw. Ru l e 1 2 1 (a) an d (b ); Su n d s t ran dCo rp . v . Co m m i s s i o n er, 9 8 T.C. 5 1 8 , 5 2 0 (1 9 92 ), aff’ d , 1 7 F.3 d 9 6 5 (7 th Ci r. 1 9 94 ). In d eci d i n g wh et h er t o g ran t s umm ary ju d g m en t , we co n s t ru e fact ual m at eri al s an di nferen ces drawn fro m th em i n th e l i g h tm o s t fav o rab l e t o th e
n o n m o v i n g p art y . Su nd st ran d Co rp ., 9 8 T.C. at5 2 0 . Ho wev er, t he n o n m o v i n g p art y “ m ay n o t res t up o n t h e m ere al l eg at io ns o r d en i al s” o f h i s p l ead in g s b u t i n s t ead“ m

us t setfo rt h s peci fi c fact s s h o wi n g th atth ere i s a g en u i n e d i s p u t e fo r t ri al .” Ru l e 1 2 1 (d ); s ee Su nd s t ran d Co rp ., 9 8 T.C. at5 2 0.- 9
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[* 9 ] Res p o n d en ts eek s p art i al s u m m ary ju d g m en t o n th e g ro u n dth atth e o v erp aym en t s o f U.K. i n co m e t ax retu rn edt o p et i t i o n er were “ refu n d ed ” wi t h i n th e
m ean i n g o f s ect i o n 9 0 5 (c)(1 )(C). Pet i t i o n er ack n o wl ed g es th at s he recei v edth es e p aym en t s; th e qu es t i on we m us td eci d e i s h o w th ey

s h ou l db e ch aract eri zedfo r U.S. t ax p u rp o s es . Th i s i s es s en t i al ly a qu es t io n o f l aw. Pet i t i o n er h as p o i n t edt o
n o m at eri al d i s p u t e o f fact affect i n g t h e d i s p os i t i o n o f t hi s qu es t io n , an dwe co n cl u d e t h ati tm ay

b e ad ju d i cat eds u m

m ari l y . 5 B. St atu t o ry

Back g ro u n d Sub ject t o cert ai n l im i tat i o n s , a U.S. ci t i zen m ay el ectt o t ak e a fo rei g n t ax cred i tag ai n s th er U.S. i n co m e t ax l i ab i l i t y fo r i n co m e t ax es p ai d o r accru edt o a fo rei gn co u n t ry o r a U.S. p os s es s i o n . Sec. 9 01 (a). Co n g res s an t i ci pat edth e d i ffi

cu l t y o f as cert ai n i n g , at t h e t i m e t h e U.S. retu rn i s fi led , th e ex actam o u n t o f fo r5 Res p o n d en ts t at es t h atth e accu racy -rel at ed p en al t i es d et erm i n edi n t h e n o t i ce o f d efi ci en cy m ay

fal l u nd er th i s Co u rt ’ s ju ri s d ict i o n an dm ay i n v o l v e d i s p u t edfact s . Ho wev er, res p o n d en th as ex p res s edh i s i n t en t i on t o co n ced e th es e p en al t i es i f t h e Co u rtg ran ts h i s m o t i o n fo r p art i al s u m m ary ju d g m en tan dd i s m i s s es t h e cas e i n so far as i tco n cern s th e fo rei g n t ax cred i tad j u s t m en t s. Res po n d en tal s o s t at es th at“ t h e p reci s e am o u n t s o f t h e refu n d edU.K. t ax es an dU.S. t ax ad ju s t m en t s ” m ay

s t i l l b e ati s s u e b u t“ sh o u l db e res o l vab l e u n d er Tax Co u rt Ru l e 1 5 5 .” It is n o tcl ear t h atwe h av e ju ri s d i ct i o n t o d et erm in e t h e p reci s e am ou n ts o f t h e refu nd edt ax es --s ect i on 9 05 (c)(1 ) p ro v i d es th at“ t he Secret ary * * * s h al l red et erm i n e t h e am o u n t o f t h e t ax ”--o r o f t h e as s ert edp en al ti es . Bu twe n eedn o t ad dres s th es e i s su es i n ru l i n g o n res p o n d en t’ s m o t io n fo r p art i al s u m m ary ju d g m en t . Pet i ti o n er’ s l i ab i l i t y (i f an y ) fo r p en al t ies wi l l b e res o l v edi n fu rt h er p ro ceed i n g s aft er d is p os i t io n o f res p o n d en t ’ s m o t i on fo r p art i al s umm ary ju d g m en t
.- 1 0 -

[* 1 0 ] ei g n t ax th atwi l l u l t i m at el y b e al l o wab l e as a cred i t . Itacco rd in gl y p ro v id ed , i n wh at i s n o w s ect i o n 9 0 5 (c), a s p eci al p ro cedu re fo r ad ju s t in g t h e - cred i twh en th e t ax p ay er’ s u l t i m at e fo rei gn t ax l i ab i l it y v ari es fro m t he am o u n t cl ai m ed . Sect io n 9 0 5(c)(1 ) s peci fi es th ree s i tuat i o n s i n wh ich a U.S. t ax p ay er’ s fo rei gn t ax cred itm

u s tb e ad j u s t ed : (A) accru edt ax es wh en p ai d d iffer fro m th e am o un t s cl ai m ed as cred i t s b y

th e t ax p ay er, (B) accru edt ax es are n otp ai db efo re t h e d at e 2 y ears aft er t h e cl o s e o f t h e t ax ab le y ear t o wh i ch s uch t ax es rel at e, o r (C) an y t ax p ai d i s refu n d edi n wh o l e o r i n p art* * * Th e reg u l at i o n s d es cri b e t h es e t h ree s i tu at i o ns as i n v ol v in g a “ fo rei g n t ax red et erm i n at i o n .” Sec. 1 .9 0 5-3 T(c), Tem p o raryIn co m e Tax Reg s ., 5 3 Fed . Reg
. 2 3 6 1 4 (J u n e 2 3 , 1 9 8 8 ). 6 If a “ fo rei g n t ax red et erm i n at i o n ” as th u s d efi n edo ccu rs , s ect i on 9 0 5 (c)(1 ) p ro v i d es th at“ t h e t ax p ay er s h al l n ot i fy t h e Secret ary , wh o s h al l red et erm i n e t h e am o u n to f t h e t ax fo r t h e y ear o r y ears affect ed .” Becau s e t h e

6 Th e 1 9 98 t em

p orary reg u l at i on s d i s cu s sedi n th e t ex t, s ecs . 1 .9 0 5 -3 T an d 1 .9 05 -4 T, Tem

p o raryIn co m e Tax Reg s . , 5 3 Fed . Reg . 2 3 6 1 4, 2 3 6 1 7 (J u n e 2 3 , 1 9 8 8 ) were i n effect th ro u g h No v em b er 6 , 2 0 07 . Th ey

were am en d edi n No v em b er 2 0 07 , b u tth e p ro vi s io n s d i s cu s s edh erei n rem ai neds ub s t an t ial l y th e s am e aft er t h atam en d m en t . Th es e p ro v i s i o n s were s et t o ex p i re o n No v em b er 5 , 2 0 1 0 . See s ecs . 1 .9 05 -3 T(f), 1 .9 0 5 -4 T(f)(3 ), Tem p oraryIn co m e Tax Reg s ., 7 2 Fed . Reg
. 6 2 7 8 4 , 6 2 7 8 7 (No v . 7 , 2 0 0 7 ). Th e p ro v i s i o n s d i scu s s edi n th e t ex twere i n effect atal l t i m es rel ev an t t o th i s cas e.- 1 1 -

[* 1 1 ] IRS, ab s en tn o t i ce fro m th e t ax p ay er, g en eral ly

wi l l n o t kn o w o f rev i s i o n s t o t h e t ax p ay er’ s fo rei g n t ax l iab i l i t i es , th e Co d e h as l o n g req u i reds el f-rep o rt i n g o f
s u ch ch an g es . See g en eral l y Pac. M et al s Co rp . v . Co m m i s s i o n er, 1 T.C. 1 0 2 8 , 1 0 2 9 , 1 0 3 1 (1 94 3 ) (d i s cu s s i ng s ect i o n 1 3 1 (c) o f t h e Rev en u e Acto f 1 9 3 6 , a p red eces s o r o f s ect io n 9 05 (c)). Sect i on 6 6 8 9 p ro v i d es a s tro n g i n cen t i v e fo r t ax p ay ers t o co m

p l y wi t h th ei r s el f-rep o rt i n g o b l i g at i on s u nd er s ect i o n 9 0 5 (c)(1 ), i m p o s i n g an as s es s ab l e p en al t y up t o 2 5 % o f th e d efi ci en cy fo r fai l u re t o p ro v i d e t h e n o ti ce req ui red b y s ect i o n 90 5 (c)(1 ) u n l es s i ti s s h o wn th ats u ch fai lu re i s due t o reas o n ab l e cau s e an dn otdu e t o wi l l fu l n eg l ect
. W i t h ex cep t i on s n o trel ev an t h ere, t h e t ax p ay er i s s up p os edt o n ot i fy th e Secret ary b y fi l i ng an am en d edretu rn . Sec. 1 .9 0 5 -4 T(b )(1 ), Tem p o raryIn co m e Tax Reg s ., 5 3 Fed . Reg . 2 3 6 1 7 (J u n e 2 3 , 1 9 8 8 ). Ani n d iv i dual t ax p ay er i s i n s t ru ct ed t o i n cl u d e wi t h h er am en dedreturn a rev i sedFo rm 1 1 1 6 , Fo rei g n Tax Cred i t , an di nfo rm at i o n s u ffi ci en tt o en ab l e t h e IRS t o red et erm i n e h er U.S. t ax l i ab i l i t y . See s ec. 1 .9 0 5-4 T(b )(1 ), (3 ), (c), Tem p oraryIn co m e Tax Reg s ., s up ra. On ce t h e IRS red et erm i n es th e t ax p ay er’ s l i ab i l i t y i n acco rd an ce wi t h s ect i on 9 0 5 (c)(1 ), “ [t ] h e am o un to f t ax (i f an y ) due * * * s hal l b e p ai db y th e t ax p ay er
o n n o t ice an dd em an db y the Secret ary , an dth e am ou n to f t ax o v erp ai d (i f an y )
s h al l b e cred i t edo r refu n d edt o t h e t ax p ay er.” Sec. 9 0 5(c)(3 ). A cro ss -referen ce- 1 2 -

[* 1 2 ] fro m

s ect i o n 6 2 1 3 co nfi rm s th atth e u s u al res tri ct i o ns o n as ses s m en td o n o t ap p ly t o s ect i o n 9 0 5 (c) ad

ju s t m en t s m ad e b y

th e Secret ary . See s ec. 6 2 1 3 (h )(2 ) (“ Fo r as ses s m en t s wi t ho u treg ardt o res tri ct i o n s i m p o s edb y th i s s ect i o n i n th e cas e
o f--(A) Reco veryo f fo rei g n i n co m e t ax es , s ee s ect i o n 9 0 5 (c).”); s ec. 1 .9 0 5
- 4 T(b )(1 ), Tem

p o raryIn co m e Tax Reg s ., s up ra (“ Sub ch ap t er B o f ch ap t er 6 3 o f t h e Co d e (rel at i n g t o d efi ci en cy p ro cedu res ) s h al l n ot ap p l y wi t h res p ectt o th e
as s es s m en to f t h e am o u nt du e up o n s u ch red et erm in at i o n .”). C. An al y s i s Pet i t i o ner h as s t i p u lat edth atth e fo rei g n t ax cred i ts s h e cl ai m edfo r 2 0 0 3
- 2 0 0 5 co rres p o n d edt o th e U.K. i n co m e t ax es wi th hel dfro m h er wag es u nd er t h e PAYE s y s t em

an drem i t t edb y h er em

pl o y er t o HM RC. Sh e h as al s o s t i p u l at ed t h ats ub s t an t i al l y

al l o f t h e t ax t h u s p ai dwas l at er ret urn edt o h er b y HM RC aft er
s h e rep o rt ed o v erp aym en ts o n h er U.K. retu rn s . Th e qu es t i on we m u s td eci d e i s wh et h er t h i s s eq u en ce o f ev en t s fal l s wi t h i n th e s cen ari o s p eci fi ed i n s ect io n 9 0 5 (c)(1 )(C), n am el y , wh ere “ an y t ax p ai di s refu n d edi n wh o le o r i n p art .” W e
co n cl u d e th ati td oes . As a g en eral ru l e, Fed eral t ax p ro vi s i o n s s h o u l db e read t o i n co rp o rat e d o m es t i c t ax co n cep ts ab s en ta cl ear co n g res s i o n al ex p res s i o n th atfo rei gn co n cep t s
s h o u ldco n t ro l
. Bi d d l e v . Co m m i s s i o n er, 3 0 2 U.S. 5 7 3 , 5 7 8 -5 79 (1 9 3 8 ). Th i s- 1 3 -

[* 1 3 ] can o n o f co n s t ru ct i o n h as “ s t ro n g ap p l i cat io n ” ev en i n the fo rei g n t ax cred i t
co n tex t , wh ere fo rei g n l ev i es m ay o ft en b e at i s s u e. Un i t edSt at es v . Go o dy ear Ti re & Ru b b er Co . & Affi l i at es , 4 9 3 U.S. 1 3 2 , 1 4 5 (1 9 8 9 ). In Go o dy ear, t h e Sup rem e Co u rth el dth atth e t erm “ accu m u l at edp ro fi t s ,” as i tap peared i n fo rm er
s ect i on 9 0 2 (c)(1 )(A), g o v ern i n g th e i n d i rectfo rei g n t ax cred i t , “ s h o u l d b e cal cu l at edi n acco rd an ce wi t h d o m es t i c t ax p ri n ci p l es .” Id
.

“ Ou r s t art i n g p o i n t , as i n al l cas es i n v ol v i ng s t atu t ory i n terp ret at i o n , ‘ m

u s t b e t h e l an g u ag e em

pl o y edb y Co n g res s.’ ” Id . at1 3 8 (qu o t i n g Rei t er v . So n o t o n e Co rp ., 4 4 2 U.S. 3 3 0, 3 37 (1 9 7 9)). W ord s u s edi n a s t atu t e are t o b e g i v en th ei r
o rd i n ary m ean in g i n th e ab s en ce o f p ers u as i v e reas o n s t o th e co n t rary . See, e.g ., Bu rn s v . Al cal a, 4 2 0 U.S. 5 7 5, 5 8 0 -5 8 1 (1 9 7 5); Hewl et t -Pack ardCo . v . Co m m i s s i on er, 1 3 9 T.C. 2 5 5 , 2 6 4 (2 01 2 ). Sect io n 9 0 5 (c)(1 )(C) au t h o ri zes th e Secret ary t o red et erm i n e a t ax p ay er’ s fo rei gn t ax cred iti f t h e fo rei g n t ax p ai d“ i s refu n ded i n wh o l e o r i n p art .” A “ refu n d ” i s co m

m o nl y d efi nedt o i n cl u d e “ [t ] h e ret u rno f m o n ey t o a p ers o n wh o
o v erp ai d , s u ch as a t ax p ay er wh o o v eres t i m at edt ax l i ab i l i t y o r wh o s e em

pl o y er wi t h h el dt o o m

u ch t ax fro m

earn i n g s .” Bl ack ’ s Law Di ct i o n ary 1 4 7 2 (1 0t h ed
. 2 0 1 4 ); s ee al so Pau l s on v . Un i t edSt at es , 7 8 F.2 d 9 7 , 9 9 (1 0 t h Ci r. 1 9 3 5) (“ Refu nd
m ean s t o p ay

b ack , retu rn , res t o re, m ak e res t i tu ti o n . Th ati s th e o rd i n ary an dp o p -- 1 4 -

[* 1 4 ] u l ar co n cep to f t he wo rd .”). Th e am o u n treturn edt o p et i t i o n er b y HM RC fo r each y ear, wh i ch rep res en t edU.K. i nco m e t ax wi t h h el db y h er em p l o y er i n
ex ces s o f the t ax s h o wn as du e o n h er U.K. retu rn , fal l s eas i l y wi t h i n the o rd i n ary
m ean i n g o f t h e wo rd“ refu n d .” Th e m ean i n g o f “ refu n d ed ” i n s ect i on 9 0 5 (c)(1 )(C) was ex p l i ci tl y ad dres s ed b y th e t ri al co u rti n Go o dy ear. See Go o dy ear Ti re & Ru b ber Co . v . Un it edSt at es , 1 4 Cl . Ct . 2 3 (1 9 8 7 ), rev ’ do n o t h er g ro u nd s an d rem an d ed , 8 5 6 F.2 d1 7 0 (Fed
. Ci r. 1 9 88 ), rev ’ dan drem an d ed , 4 9 3 U.S. 1 3 2 (1 9 8 9 ). Th e t ax p ay er t h ere, t h e U.S. p aren to f a wo rl dwi d e g ro up (Go o dy ear), h adcl ai m edi n d i rect fo rei g n t ax cred i t s fo r 1 9 7 0 an d 1 9 7 1 b as edo n U.K. t ax es p ai d b y i t s U.K. s ubs i d i ary . Th e U.K. s ub

s i di ary i n cu rredl os s es i n s ub seq u en ty ears an dcarri edth o s e l o s s es b ackt o 1 9 7 0
an d 1 9 7 1 ; th e U.K. s ub s i d i ary th en ap p li edfo r, an drecei v edi n 1 9 75 an d 1 9 7 6 , refu nd s o f t h e U.K. t ax i th adp ai dfo r 1 9 7 0 an d1 9 7 1. In v o ki n g s ect io n 9 0 5 (c)(1 )(C), t h e IRS red et erm i n edGo o dy ear’ s 1 9 7 0 -1 9 7 1 fo rei g n t ax cred i t s an d
as s es s edth e res u l t i ng d efi ci en ci es . Th e t ax p ay er p ai d t h e as ses s edt ax es an d , fo l l o w i n g d en ial o f i ts refu n dcl ai m , fi l eda refu n ds u i ti n th e U.S. Co urto f Fed eral Cl ai m s . Th e i s s u e ad dres s ed by

th e Sup rem e Co u rtwas wh et her t h e t erm “ accu m u l at ed p ro fi t s ” i n fo rm er s ect i o n 9 0 2 (c)(1 )(A) s h o u l d b e cal cu l at edi n acco rd an ce- 1 5 -

[* 1 5 ] wi th d o m es t i c o r fo rei g n t ax p ri n ci pl es . Atth e t ri al l ev el , h o w ev er, Go o dy ear rai s eda s eco nd an d d i s t i n ctl eg al i s s u e: “ wh et h er t h e p aym en t s recei v edb y i t s fo rei g n s ub s id i ary

fro m th e Bri t i s h g o v ern m en tdu ri n g 1 9 7 5 an d 1 9 7 6 were p ro perl y

cl as s i fi edan dtreat edas refu n d s fo r y ears 1 97 0 an d1 97 1
u n d er s ect i o n 9 0 5 .” Go od y ear, 1 4 Cl . Ct . at2 4. Th e t ax pay er arg u edth atth e t erm

“ refu n d” as u s edi n s ect io n 9 05 (c)(1 )(C) “ ap p li e[d ] o n l y t o refu n d s o f i n co rrect fo rei gn t ax es .” In th e cas e o f a l o s s carryb ack , Go od y ear n o t ed , th e fo rei g n t ax i n i t i al l y rep o rt edan dp ai db y th e fo rei g n s ub s i di ary

fo r t h e carryb acky ear was
co rrect
. Th atb ei n g s o , Go o dy ear u rg edth at“ t h e s ub seq u en t ev en to f a n et
o p erat i n g l o s s [s h o u l d ] n o t d i s tu rb an earl i er cred i tg ran t edfo r a fo rei g n t ax wh i ch
was co rrect wh en p ai d .” Id . at3 1 -3 2
. Fi n d i n g s ect i o n 9 0 5(c)(1 )(C) t o b e “ p l ai n an du n am b ig u o u s ,” t h e co u rt
s qu arel y reject edth i s arg u m en t : [W ] h en s t atu to ry

l an gu ag e i s u n am

b i g u o u s * * * , wo rd s i n th e s t atu t e are co n s i d ered t o b e u s edi n th ei r o rd i n ary an du s ual s en s e. * * * Th e co u rtag rees wi t h d efen d an tth atth e reas o n fo r t h e refu n d i s i m m at eri al . Wh at i s s ig n i fi can ti s th ata t ax refu ndwas p ai d t o , an d recei v edb y , p l ai n ti ff’ s s ub s i d i ary . Th e s tatu t o ry t erm “ refu nd ” wh en co n s t ru ed i n i t s o rd i n ary

an du s u al s en s e i n cl u d es rep aym en to f t ax d o l l ars s t emm in g fro m a s ubs eq u en t n eto p erat i ng l o ss . Th e co urt wo u ldb e h ard -p res s edt o fi n dan y rep aym en to f t ax d o l l ars t o n o tb e a refu n das t h e t erm

i s u s ed . [Go o dy ear, 1 4 Cl
. Ct . at3 2.]- 1 6 -

[* 1 6 ] In th e i n s tan tcas e, p et i t i o n er i n d i s pu t ab l y recei v ed“ rep aym en t [s ] o f t ax d o l l ars ” fro m

HM RC, an ds h e ag rees thats h e recei v edth es e rep aym en t s “ un d er a cl ai m o f ri g h t .” Cf. N. Am . Oi l Co n s o l. v
. Bu rn et , 2 8 6 U.S. 4 1 7 , 4 2 4 (1 9 3 2 ). 7 Bu t
s h e as s ert s th atth es e rep aym en t s were n o t “ refu n d s ” b ecau se i t was u n cert ai n wh et h er s h e wo u l d u l t i m at el y be ab l e t o k eep th i s m o ney . HM RC ch aract eri zedas

“ t ax s h el ters ” t h e fi l m

p art n ers h i p s i n wh i ch s h e h adi n ves t ed , an dl i ti g at i o n o n t h i s s ub jecti s s t i l l p en d i n g i n v ari o u s U.K. co u rt s. Pet i t i o n er av ers th atHM RC, i n t h e v i ew o f h er t ax ad v i s ers , i s “ l i k el y t o p rev ai l i n * * * [i t s ] ch al l en ge t o th e d edu ct i o n s g en erat edb y

th e fi l m p art n ers h i p s ” i n wh i ch s h e h adi nv es t ed
.

7 Pet i t i on er arg u es th atth e cl ai m o f ri g h td o ct ri n e d oes n o tap pl y h ere b ecau s e s ect i o n 9 0 5 (c) t ak es a “ t ran s act i o n al ap p ro ach ” t o d et erm i n i ng th e co rrect fo rei gn t ax cred it . Inh er v i ew, s ect i o n 9 0 5 (c) rep res en t s an ex cep t i o n t o th e an n u al acco u n ti n g p ri n ci pl e b ecau s e “ t h ere i s n o s tatu t e o f l i m i t at i o n s ” o n s ect i o n 9 0 5 (c)(1 ) red et erm i n at io n s b y t h e Secret ary . See Pac. M et al s Co rp ., 1 T.C. at 1 0 3 0 -3 1 . Co n trary t o p et i t i o n er’ s v i ew, t h e an nu al acco u n t i n g p ri n ci p l e i s fu l l y ap p li cab l e h ere. In d eed , s ect i o n 9 0 5 (a) ex p l i ci t l y al l o ws cas h-b as i s t ax p ay ers t o el ect accru al b as i s acco u n t i ng wh en cl ai m i n g fo rei g n t ax cred i t s . In an y ev en t , p et i t i o n er ci t es n o au t h o ri t y fo r t h e p ro p os i t i o n th ats ect i on 9 0 5 (c) o r t h e o v eral l fo rei gn t ax cred itreg i m e ap p l i es o n a t ran sact i o n al b as i s rat h er t h an an an n u al b as i s . Qu i t e t h e co n t rary : Pet i t i o n er ack n o wl ed g es (co rrect ly ) t hatth e Un i t ed St at es el im i n at es d o ub l e t ax at i on th ro u gh fo rei g n t ax cred i ts “ b y ap p l y in g th em g l o b al l y an d o n an an n u al rat h er th an a t ran s act i o nal b as i s .” W e co ncl u d e th at t h e “ cl ai m o f ri g h t ” d oct ri ne ap p l i es t o t h e rep aym en t s o f t ax d ol l ars t hatp et i t i o n er recei v edn o l es s t h an i two u l dap p l y t o an y o t her t ax refu n d.- 1 7 -

[* 1 7 ] W e accep tp et it i o n er’ s av erm en t s as tru e, b u tth ey are i rrel ev an ti n d et erm i n i n g wh et h er t h e rep aym en t s o f U.K. t ax s h e recei vedwere “ refu n ds .” Fo r U.S. t ax p u rp o s es , the t erm

“ refu n d ” d o es n o tco n n o t e fi nal i ty o r t h e fi n al d et erm i n at i o n
o f a t ax l iab i l i ty . Ev ery

y ear m i l l i o n s o f Am eri can s fi le Fo rm s 1 0 40 s h owi n g an
o v erp aym en t an d i n d i cat i n g th e am o u n t o f t h e o v erp aym en tth ey wan t“ refu n d ed ” t o them . Inthe ab s en ce o f co n cern s ab o u ti d en t i t y th efto r o t h er u n us u al ci rcu m s t an ces , th e IRS u s u al l y p ay s s u ch refu n d s m o re o r l es s au t o m at i cal l y . No t wi t h

s t an d i n g p aym en to f s uch refu n d s , th e IRS ro u t i n el y ex am i n es s u ch retu rn s an d , i f i t co n cl u d es th atth e t ax p ay er i n co rrect l y co m pu t ed t he t ax , i t m ay

as s es s ad d i t i o n al t ax aft er ex h au s t i n g d efi ci en cy p ro cedu res . In s ho rt , th e fact th ata t ax p ay er
m ay u l t i m at el y

h av e t o rep ay

th e m o n ey

i n i t i al l y refu n d edt o h er d o es n o tm ean t h ats h e d i d n o t g et a “ refu n d .” Th e o v eral l s t ru ctu re o f t h e fo rei gn t ax cred i tp ro v i s i o n s l i k ewi s e s h o ws th e
erro r o f p et i t i o n er’ s arg u m en t. As a cas h b as i s t ax p ay er, p et i t i o n er i s en t i t l edt o cl ai m a cred itfo r fo rei g n i n co m e t ax es wh en p ai d
. If h er p red ict i o n s p ro ve co rrect
an d HM RC l at er co l l ect s ad d i ti o n al 2 0 0 2-2 0 0 6 U.K. t ax fro m h er, s h e wi l l b e en t i tl edt o cl ai m a cred itfo r t h o s e t ax es fo r t h e y ear i n wh i ch s h e p ay s t hem . If t h e cred i t s s h e cl ai m edo n h er 2 0 0 3 -2 0 0 5 return s were n o tredu cedt o refl ectth e U.K.- 1 8 -

[* 1 8 ] t ax thatwas p rev i o u s l y refu n d ed , s h e wo ul d i n effect b e al l o w eda d o ub l e cred i tfo r the s am e t ax . Pet i t i o ner co n ten d s th atreject i o n o f h er arg u m en tm ay res u lti n “ d o ub l e t ax at io n ,” co nt raryt o th e p o l i ci es u n d erl y i n g th e fo rei g n t ax cred i tan dthe U.S.- U.K. i n co m e t ax treat y . Sh e b as es th i s co n ten t i o n o n t h e as s ert i o n th at , i f s h e i s req u i red“ t o rep ay

refu n ds p rev i o u s l y

recei v edfro m

H.M .R.C. * * * , an d s u ch rep aym en t s are co n s i d ered cred i t ab l e fo rei gn t ax es * * * i n t h e y ear o f p aym en t , [h er] p ers o n al ci rcu m s t an ces are s u ch th at[s h e] wo ul do b t ai n n o U.S. t ax b en efi t fro m s u ch cred i t s . ” Pet i t i o ner o ffers n o ex p lan at i o n o r fact u al s up p o rtfo r t h i s v ag u e as s ert i o n , b u ti ti s u np ers u as i v e i n an y ev en t . Ito ft en h ap p en s th att ax p ay ers , b ecau s e o f i n d i v i du al ci rcu m s t an ces o r p as s ag e o f t i m e, are u n ab l e t o d eri v e fu l l b en efi tfro m
co n ti n g en tt ax as s et s th ey h av e b o o k edo r ex p ectt o recei v e, s u ch as carry fo rward s
o f fo rei g n t ax cred i t s , n eto p erat i n g l o s s es , p as s i v e l o s ses , o r i n v es t m en t i n t eres t
. Th i s d oes n o t d em o n s trat e an y s t ru ctu ral d efect i n the Co d e an dd oes n o t g i v e ri s e t o “ d o ub le t ax at i o n . ” Its i m p l y refl ect s th e fact s th at t h e fu tu re i s u np red i ct ab l e
an d t h att ax ab l e i nco m e m u s tb e d et erm in edo n an an n ual b as i s . 8

8 Pet i t i on er co n t en d s th atres p o n d en t ’ s m o t i o n fo r p art i al s u m m ary ju d g m en t s h o u ldb e d en i edb ecau s e “ an y fai l u re o f p et i t i on er t o n o t i fy th e res p o n d en to f t h e (co n ti n u ed ...)- 1 9 -

[* 1 9 ] In s u m , we co n cl u d e t hatth e rep aym en t s o f U.K. i n co m e t ax t h atp et i t i o n er recei v eddu ri n g 2 0 03 -2 0 0 5 rep res en t edp rev i o u s l y p ai d fo rei g n t ax th atwas “ refu n d edi n wh o l e o r i n p art ” wi t h i n t h e m ean i n g o f s ect i o n 9 0 5 (c)(1 )(C). To refl ect t h i s d et erm i n at i on , An o rd er wi l l b e i s s u edg ran t i n g
res p o nd en t ’ s m o t i o n fo r p art i al s u m m ary ju dg m en t
.

8 (...co n t in u ed ) recei p t o f a refu nd* * * atth e t i m e t h e rep aym en t s were recei v edwas du e t o reas o n ab l e cau s e.” Th e ex i s t en ce v el n o n o f “ reas o n ab l e cau s e” m ay b e rel ev an tt o p et i t i o n er’ s l i ab i l i t y

fo r th e s ect i o n 6 6 6 2 accu racy -rel at edp en al t y an d/ o r t h e p en al t y i m

po s ed“ [i ] f t h e t ax p ay er fai l s t o n o t i fy t h e Secret ary * * * o f fo rei g n t ax red et erm i n at i o n .” See s ec. 6 6 8 9 (a) (i m p o s i ng p en al ty

o f up t o 2 5% u n l es s fai l u re was “ due t o reas o n ab l e cau se an dn o tdu e t o wi l lfu l n eg l ect ”). Bu tth e ex i st en ce o f reas on ab l e cau s e i s i rrel ev an ti n d et erm i n i ng wh et her t h e rep aym en ts o f U.K. t ax t h atp et i t i o n er recei vedco n s t i tu t ed“ refu n d s ” wi t h in th e m ean i n g o f s ect i o n 9 0 5 (c)(1 )(C). (Res p o n d en td i dn o tm o v e fo r s u m m ary ju d g m en to n th e accu racy rel at ed p en al t y . As far as we kn o w , th e IRS h as n o td et erm i n eda s ect i o n 6 6 8 9 p en al t y an d(i f i t h ad ) th atp en al t y , as an as s es s ab l e p en al t y , wo u l dap p ear t o l i e o u t s i d e o u r d efi ci en cy ju ri s d i ct i o n .)