T.C. Memo. 1997-297

UNITED STATES TAX COURT

ELGIN E. FLAGG, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15376-95. Filed June 30, 1997.

Elgin E. Flagg, pro se.

Linas N. Udrys, for respondent.

MEMORANDUM OPINION

LARO, Judge: This case is before the Court fully

stipulated. See Rule 122. Elgin E. Flagg petitioned the Court

on August 11, 1995, to redetermine respondent's determination of

the following deficiencies in his 1986, 1989, 1990, 1991, and

1992 Federal income taxes and additions thereto:
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 Additions to Tax 

 Sec. Sec.

Year Deficiency 6651(a)(1) 6654

1986 $17,266 $1,024 $38 

1989 49,636 9,290 2,325 

1990 22,592 2,353 523

1991 125,283 26,569 5,992 

1992 56,316 12,426 2,137 

Following respondent's concession that petitioner is not liable

for the additions to tax under sections 6651(a)(1) and 6654 and

that petitioner actually overpaid his taxes in each of these

years, we must decide whether petitioner is entitled to refunds

greater than the amounts proffered by respondent. We hold he is

not. Section references are to the Internal Revenue Code in

effect for the years in issue. Rule references are to the Tax

Court Rules of Practice and Procedure.

Background

All of the facts have been stipulated and are so found. The

stipulated facts and exhibits submitted therewith are

incorporated herein by this reference. Petitioner resided in

San Juan Capistrano, California, when he petitioned the Court. 

He began working for General Electric (GE) in or around 1956. He

retired from GE in 1991 and began receiving a pension in the same

year. He received payments of interest in each of the subject

years, except 1986.
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Petitioner did not file a timely Federal income tax return

for any of the subject years. With respect to his returns for

each of the years 1986, 1989, and 1990, the time for filing was

extended until August 15 of the year in which the return was due. 

On May 11, 1995, respondent issued petitioner two notices of

deficiency, one for 1986, 1989, and 1990, and the other for 1991

and 1992. Before May 11, 1995, respondent had prepared "returns"

for petitioner for each of the subject years under the authority

of section 6020(b). 

After receiving the notices of deficiency, petitioner filed

a return for each subject year. He filed his 1986 return on

August 8, 1995, his 1989 return on September 15, 1995, his 1990

return on September 18, 1995, his 1991 return on August 28, 1995,

and his 1992 return on September 8, 1995. With the exception of

a claimed capital loss deduction for 1991, respondent accepted

each return as filed. Petitioner amended his returns for 1991

and 1992. Respondent accepted the amended returns as filed.

Prior to 1986, petitioner purchased limited and general

partnership interests in several oil and gas ventures. These

ventures realized operating losses, and petitioner reported his

shares of these losses on Schedule C, Profit or (Loss) From

Business or Profession, and Schedule E, Supplemental Income. 

Petitioner also purchased various securities, and he reported on

his returns capital losses attributable to worthless securities. 

Petitioner was entitled to carry over the losses that he was
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unable to recognize in the year realized due to the limitation on

capital losses set forth in section 1211(b).

For each year in issue, petitioner's income tax liability,

tax withheld, overpayment, and the amount of the overpayment that

was attributable to worthless securities and oil and gas ventures

are as follows:

 1986 1989 1990 1991 1992 

Tax liability $5,740 $7,879 $10,481 $18,917 $5,352

Amounts withheld by

 GE 13,169 12,274 12,757 14,321 ---

 Pension trustee --- --- --- 3,950 4,781 

 Interest payers --- 201 424 740 1,824

 Total 13,169 12,475 13,181 19,011 6,605

Overpayment 7,429 4,596 2,700 94 420

Attributable to 

 Worthless securities 960 840 845 94 420

 Oil & gas ventures 4,558 3,077 2,700 94 1,253

Discussion

Respondent concedes that petitioner is entitled to refund of

$840, $845, $94, and $420 for the respective years from 1989

through 1992. Respondent argues that petitioner is not entitled

to a refund of any other overpaid amount because: (1) The

amounts paid for 1986 were paid by petitioner more than 7 years

before the issuance of the notice of deficiency and (2) the

disputed amounts paid for each other year were paid by petitioner

more than 2 years before the issuance of the notice of

deficiency, and none of these amounts were attributable to items

listed in section 6511(d) that would extend this period beyond
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2 years. Petitioner argues that 100 percent of the overpayments

were attributable to worthless debts or worthless securities,

which makes them refundable in full under the 7-year rule of

section 6511(d)(1). Petitioner alleges in his brief that the

overpayments were attributable to debts and securities which were

worthless, and he attached certain documents to his brief which

he claims support his allegation. Petitioner argues that each

"return" prepared by respondent under section 6020(b) was a

return for purposes of section 6511, and he contends in his brief

that respondent prepared the returns on August 4, 1994. 

Petitioner contends in his brief that respondent offered him a

settlement under which he would have been allowed the 1986

overpayment in full, and he argues that the respondent's offer

proves his right to the 1986 refund. 

We hold for respondent. Petitioner must prove that the

disputed amounts were attributable to worthless debts or

worthless securities, Welch v. Helvering, 290 U.S. 111, 115

(1933); see also Borchers v. Commissioner, 95 T.C. 82, 91 (1990)

(fact that case submitted to the Court fully stipulated under

Rule 122 does not change or otherwise lessen taxpayer's burden),

affd. 943 F.2d 22 (8th Cir. 1991); Drum v. Commissioner, T.C.

Memo. 1994-433 (same), affd. without published opinion 61 F.3d

910 (9th Cir. 1995), and petitioner must demonstrate that his

claim for refund was timely, Michelson v. Commissioner, T.C.

Memo. 1997-39. Although section 6512(b)(1) bestows jurisdiction
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on this Court to determine the existence and amount of any

overpayment of tax to be refunded for a year before us, section

6512(b)(3)(B) prohibits the Court from awarding a refund unless

we determine that the amount in question was paid

within the period which would be applicable under

section 6511(b)(2) * * * or (d), if on the date of the

mailing of the notice of deficiency a claim had been

filed (whether or not filed) stating the grounds upon

which the Tax Court finds that there is an overpayment

* * * 

See also Commissioner v. Lundy, 516 U.S. , 116 S. Ct. 647,

650-652 (1996). The relevant provision of section 6511(b)(2)

provides that when a claim for refund is outside the 3-year

period of section 6511(a), the amount of the refund may not

exceed the amount of tax paid within the 2 years preceding the

claim for refund. Sec. 6511(b)(2)(B). Section 6511(a) provides

that a claim for refund generally must be made within 3 years

from the time the return was filed or if no return was filed by

the taxpayer, within 2 years from the time the tax was paid. The

relevant provision of section 6511(d) provides that, in the case

of a refund that relates to an overpayment of tax imposed on

account of a worthless debt under section 166 or a worthless

security under section 165(g), or the effect that the

deductibility of such a debt or security has on the application

to the taxpayer of a carryover, "in lieu of the 3-year period of

limitation prescribed in subsection (a), the period shall be

7 years from the date prescribed by law for filing the return for
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1 Even if they were, we find no evidence that respondent

prepared these returns on Aug. 4, 1994.

the year with respect to which the claim is made." Sec.

6511(d)(1).

Petitioner has not proven that the disputed amounts were

attributable to worthless debts or worthless securities. His

allegation in his brief that the disputed amounts stemmed from

debts and securities which became worthless is unsupported by the

record. The documents attached to his brief are not part of that

record. Rule 143(b); see West 80 St. Garage Co. v. Commissioner,

12 B.T.A. 798, 800 (1928); see also Saunders v. Commissioner,

T.C. Memo. 1992-361, and the cases cited therein. Nor does the

evidence of record persuade us that respondent offered petitioner

a settlement under which he would be refunded any of the 1986

overpayment. Nor do we agree with petitioner's claim that

respondent's "returns" are a return for purposes of section 6511. 

They are not.1 See sec. 6501(b)(3); see also United States v.

Stafford, 983 F.2d 25, 27 (5th Cir. 1993) (the Commissioner's

execution of a return under section 6020(b) does not relieve the

taxpayer of his or her obligation to file a return); In re

Bergstrom, 949 F.2d 341, 343 (10th Cir. 1991) (same); United

States v. Poschwatta, 829 F.2d 1477, 1483 (9th Cir. 1987) (same);

Moore v. Commissioner, 722 F.2d 193, 196 (5th Cir. 1984) (same),

affg. T.C. Memo. 1983-20.
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We apply the established law on the refund of overpayments

to the stipulated amounts shown in the chart above. Each of the

withheld amounts was deemed withheld and paid on April 15 of the

year in which the return was due, and the fact that petitioner

received an extension of time to file some of the returns did not

change the date as of which the tax is deemed paid. Sec. 6513(a)

and (b)(1). Respondent issued the notices of deficiency to

petitioner on May 11, 1995, and, as of that date, petitioner had

not yet filed his returns. Thus, apart from the effect of

section 6511(d), petitioner is generally limited to a refund of

only amounts that he paid during the 2-year period prior to

May 11, 1995. Commissioner v. Lundy, 516 U.S. at , 116 S. Ct.

at 647. Respondent has conceded that section 6511(d)(1) entitles

petitioner to a refund of the overpayments for each subject year,

except 1986, to the extent that the overpayments are attributable

to worthless debts or worthless securities. Accordingly,

petitioner is entitled to a refund of those amounts. With

respect to the 1986 overpayment, however, respondent has not made

a similar concession because all of the underlying amounts were

paid more than 7 years before the notice of deficiency was

issued. We hold that petitioner is not entitled to a refund of

this amount.
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In reaching our holdings herein, we have considered all

arguments made by petitioner for contrary holdings and, to the

extent not discussed above, find them to be irrelevant or without

merit.

To reflect the foregoing, 

Decision will be entered

under Rule 155.