UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2 August Term, 2002 3 (Argued: January 28, 2003 Decided: August 5, 2003) 4 Docket No. 02-6083; 02-6117 (XAP) 5

------------------------------------- 6 DANIEL L. CARROLL and INGRID N. CARROLL, 7 Plaintiffs-Appellees-Cross-Appellants , 8

- v - 9 UNITED STATES OF AMERICA, 10 Defendant-Appellant-Cross-Appellee
. 11

------------------------------------- 12
Before: OAKES, CALABRESI, and SACK, Circuit Judges

. 13 Appeal from a decision of the United States District 14 Court for the Eastern District of New York (Denis R. Hurley, 15 Judge), granting partial summary judgment in favor of the 16 plaintiffs on their claim for reimbursement of penalties because 17 the IRS's notice of deficiency was untimely. The court also 18 granted the IRS's motion to deny the plaintiffs any reimbursement 19 in excess of $20,000 –- the amount of the penalties the 20 plaintiffs had paid in the two years immediately preceding the 21 date on which they filed their claim for a refund -- under 26 22 U.S.C. § 6511(b)(2)(B). We conclude (1) that the IRS's notice of 23 deficiency was untimely and that the plaintiffs are therefore 24 entitled to a refund of the penalties they paid in response to 25 that notice; and (2) that the "look-back" provision of 262

section 6511(b)(2)(B) does not prevent the plaintiffs from 1 recovering the full amount of the penalties they paid. 2 Affirmed in part; vacated and remanded in part. 3 DAVID G. EBERT, Ingram Yuzek Gainen 4 Carroll & Bertolotti, LLP, New York, NY, 5 for Plaintiffs-Appellees-Cross6 Appellants
. 7 KENNETH W. ROSENBERG, Tax Division, 8 Department of Justice, Washington, D.C. 9 (Eileen J. O'Connor, Assistant Attorney 10 General, Richard Farber, Tax Division, 11 Department of Justice, Alan Vinegrad, 12 United States Attorney General for the 13 Eastern District of New York, of 14 counsel ), for Defendant-Appellant-Cross15 Appellee
. 16 SACK, Circuit Judge : 17 This case arises out of a limited partnership -- 18 Stevens Recycling Associates ("Stevens" or "Stevens partnership") 19 -- in which the plaintiff Daniel L. Carroll invested. On the 20 basis of a $16,667 investment in Stevens in 1982, Plaintiffs21 Appellees Daniel L. and Ingrid N. Carroll ("the Carrolls") 22 reduced the amount of the income tax liability that they reported 23 for that year by $32,152. After the Tax Court held in a related 24 case in 1992 that transactions of the kind employed by the 25 Stevens partnership were a sham, the tax matters partner of the 26 Stevens partnership entered into a settlement with the IRS 27 reducing the deductions and credits claimed by Stevens to zero. 28 This settlement, which cost the Carrolls all of their 29 Stevens-related deductions and credits for 1982, was confirmed by 30 an order and decision signed by the Chief Judge of the United 313

States Tax Court that bore a date stamp indicating that it was 1 served on February 23, 1994. At the bottom of the order and 2 decision, after the signature of the chief judge, there appears 3 the word "Entered:", but the line thereafter is blank -- no entry 4 date appears. The Tax Court vacated that decision some four 5 months later and issued a second order and decision, identical to 6 the first except that it included (1) an introductory section 7 explaining the purpose of the second order and decision; (2) a 8 new "served" date; and (3) a date stamp on the "entered" line at 9 the foot of the decision so that it reads, "Entered: JUN 6, 10 1994." The IRS thereafter filed a notice of deficiency against 11 the Carrolls within the statutory limitations period applicable 12 to the second order and decision, but after the expiration of the 13 statutory limitations period applicable to the first. 14 On September 11, 1998, having paid the taxes and 15 penalties assessed against them and filed refund claims with the 16 IRS, the Carrolls brought suit in the United States District 17 Court for the Eastern District of New York contending, inter 18 alia, that the notices of deficiency were untimely because the 19 initial decision without the "Entered:" date started the 20 statutory limitations period running. The district court (Denis 21 R. Hurley, Judge) initially ruled against the Carrolls. Carroll 22 v. United States , No. CV 98-5740, 1999 WL 1090814, 1999 U.S. 23 Dist. LEXIS 17999 (E.D.N.Y. Oct. 19, 1999) ("Carroll I "). On 24 reconsideration, however, the court decided in the Carrolls' 25 favor as to the untimeliness of the notices of deficiency. 261The Federal Supplement erroneously reports that this is a

decision of United States District Court for the Southern District of New York.
4 Carroll v. United States , No. CV 98-5740, 2000 WL 1819419, 2000 1 U.S. Dist. LEXIS 17582 (E.D.N.Y. Oct. 23, 2000) ("Carroll II "). 2 On further reconsideration, the court granted the IRS's motion to 3 deny the Carrolls relief in excess of $20,000, the amount of the 4 penalties paid by the Carrolls in the two years immediately 5 preceding the date of their refund claim, pursuant to 26 U.S.C. 6 § 6511(b)(2)(B). Carroll v. United States , 198 F. Supp. 2d 328 7 (E.D.N.Y. 12001) ("Carroll III "). 8 The IRS appeals from the entry of partial summary 9 judgment for the Carrolls. It argues that the initial Tax Court 10 decision without the entry date was not validly rendered under 11 section 7459(c) and therefore did not start the statutory 12 limitations period running. The IRS also argues that res 13 judicata bars the district court from ruling on the matter, 14 because the matter should have been raised as an appeal from the 15 second Tax Court decision. In a cross-appeal, the Carrolls 16 assert that they are entitled to a full refund of the disputed 17 penalties. 18 Like the district court, we conclude that the IRS's 19 notice of deficiency was untimely and that this suit is not 20 barred by principles of res judicata. We disagree with the 21 district court, however, as to the amount refundable to the 22 Carrolls, concluding that the "look-back" provision of 235

section 6511(b)(2)(B) does not prevent the Carrolls from 1 recovering the full amount of the penalties that they paid for 2 1982. We therefore affirm in part and vacate and remand in part. 3

BACKGROUND 4 The relevant facts, which are set forth in detail in 5
Carroll I , Carroll II , and Carroll III , are undisputed. We 6 rehearse them here only insofar as we think it necessary to 7 explain our resolution of this appeal. 8 In 1982, plaintiff Daniel L. Carroll paid $16,667 for 9 one-third of a unit interest in a limited partnership known as 10 Stevens Recycling Associates. Carroll III , 198 F. Supp. 2d at 11 334-35. The Stevens partnership was one of seven substantially 12 identical plastics recycling programs that purported to lease 13 machines designed to grind waste polyethylene and similar 14 material into usable plastic form. Based on this investment, on 15 their 1982 joint federal income tax return, the Carrolls claimed 16 a deduction for advance rentals in the amount of $13,064, an 17 investment tax credit of $12,810, and a business energy credit of 18 $12,810. Id.at 335. Their overall tax liability was reduced by 19 $32,138. Id. 202The tax matters partner is "the partner designated to act

as a liaison between the partnership and the Internal Revenue Service in administrative proceedings, and as a representative of the partnership in judicial proceedings." Addington v. Comm'r, 205 F.3d 54, 60 (2d Cir. 2000); see26 U.S.C. § 6231(a)(7).

3Questions about the legitimacy of Winer's ongoing status as the tax matters partner are not relevant to this appeal.

4 Hirshfield Ialso arose from the tax treatment of the Stevens partnership. Its facts and issues overlap with those before us. In Hirshfield I , the United States District Court for the Southern District of New York (Robert W. Sweet, Judge ) agreed with the plaintiffs' argument that the notice of deficiency was untimely, but held that it lacked jurisdiction to consider the question because partnership items were at issue. Hirshfield I , 2001 WL 579783, at *10-*11, 2001 U.S. Dist. LEXIS 6955, at *30- *34. In response to a motion for reconsideration, the court held 6 The Tax Matters Partner 1 Sam Winer was the promoter and tax matters partner2of 2 Stevens, as well as various similar recycling limited 3 partnerships. Id.at 334-35.On August 17, 1984, the United 4 States filed a complaint against Winer in the United States 5 District Court for the Middle District of Florida, alleging that 6 he had organized and promoted several abusive tax shelters, 7 including Stevens, and had made gross-valuation overstatements in 8 connection with Stevens. Id.at 335. After obtaining a judgment 9 enjoining Winer from representing Stevens and its partners but 10 failing to find another Stevens partner willing to replace him, 11 the IRS obtained Winer's reinstatement as the tax matters partner 12 for the limited purpose of providing administrative services for 13 Stevens and its partners. 3 Id. ; see also Hirshfield v. United 14
States , No. 99 Civ. 1828, 2001 WL 579783, at *4, 2001 U.S. Dist. 15 LEXIS 6955, at *13-*14 (S.D.N.Y. May 31, 2001) ("Hirshfield I "). 4 16that it had jurisdiction to consider the plaintiffs' claim

regarding the penalties, noting that "[t]he government agrees that the jurisdictional bar was inappropriately invoked." Hirshfield v. United States , 177 F. Supp. 2d 220, 221 (S.D.N.Y. 2001) ("Hirshfield II "). The court also held that the plaintiffs' suit was not barred by principles of res judicata and concluded that the plaintiffs were entitled to a refund of the disputed penalties. Id.at 222-24. In a summary order entered on the date hereof, we affirm the judgment of the district court in Hirshfield II

. 7

Events Leading to the Winer/IRS Settlement 1 On June 5, 1989, the IRS issued a Notice of Final 2 Partnership Administrative Adjustment for the Stevens partnership 3 for the years 1982 through 1985, which significantly altered 4 Stevens's income and deductions to the detriment of its partners. 5
Carroll III , 198 F. Supp. 2d at 336. On July 24, 1989, Winer 6 brought an action on behalf of Stevens in the United States Tax 7 Court pursuant to 26 U.S.C. § 6226 seeking a redetermination of 8 the adjustments against Stevens for the tax years 1982 through 9 1985. Carroll III , 198 F. Supp. 2d at 336. 10 On March 25, 1992, in a related proceeding, the Tax 11 Court held that the lease transactions conducted by six recycling 12 partnerships similar to Stevens, in which Winer was also a 13 general partner, were a sham. Provizer v. Comm'r, 63 T.C.M. 14 (CCH) 2531 (1992), aff'd, 996 F.2d 1216 (6th Cir. 1993), cert. 15 denied, 510 U.S. 1163 (1994); see Hirshfield I , 2001 WL 579783, 16 at *5, 2001 U.S. Dist. LEXIS 6955, at *15. After the Tax Court 17 had concluded that one of these recycling partnerships owed 18 penalties, Winer conceded the IRS's position in the pending 19 Stevens section 6226 action. See id. On November 9, 1993, the 205Because the IRS characterized the concession as a

settlement, and the Tax Court later treated it as such, we, too, refer to it as a settlement. 8 IRS moved in Tax Court for entry of a decision that Winer, as the 1 tax matters partner for Stevens, had thus "'entered into a 2 settlement agreement' with the IRS." Carroll III , 198 F. Supp. 3 2d at 336. 5 4 The First Tax Court Decision 5 On February 17, 1994, Tax Court Special Trial Judge 6 Norman H. Wolfe granted the IRS motion by endorsing it with the 7 stamp: "granted." On February 23, 1994, the decision was served 8 on the parties. Also on February 23, 1994, Tax Court Chief Judge 9 L. W. Hamblen, Jr., signed an Order and Decision (the "first Tax 10 Court decision" or the "first decision") resolving all of the 11 issues relating to Stevens's income for the tax years 1982 12 through 1985. Carroll II , 2000 WL 1819419, at *1, 2000 U.S. 13 Dist. LEXIS 17582, at *3. This decision bore no date in the 14 space after the word "Entered:" at the bottom of the document, 15 following Chief Judge Hamblen's signature. Id. The only date on 16 the decision was a stamp on its first page: "SERVED FEB 23, 17 1994." Id.The Tax Court docket sheet reflected the entry, 18 "DECISION ENTERED, Judge Hamblen," on the date "02/23/94," and 19 indicated service of the decision upon all parties on the same 20
date. Id. 219 The Second Tax Court Decision 1 On June 6, 1994, 103 days after the first decision was, 2 according to the docket sheet, entered, Chief Judge Hamblen 3 issued another Order and Decision in this case (the "second Tax 4 Court decision" or the "second decision") which began by stating: 5 On February 23, 1994, through 6 inadvertent clerical error, the Court served 7 on the parties a Decision which did not bear 8 the requisite "Entered" date. Accordingly, 9 it is 10 ORDERED that the Decision served on 11 February 23, 1994, is vacated and set aside. 12

See id. , 2000 WL 1819419, at *2, 2000 U.S. Dist. LEXIS 17582, at 13 *3-*4 (alterations omitted). At the bottom of the order, next to 14 the word "Entered:", the date "JUN 6 1994" was stamped. Other 15 than the preamble quoted above, the date of service (June 6, 16 1994, instead of February 23, 1994), and the date stamp at the 17 foot of the document, the second Tax Court decision was identical 18 to the first. See id. , 2000 WL 1819419, at *2, 2000 U.S. Dist. 19 LEXIS 17582, at *4. The Tax Court docket sheet, under the date 20 "06/06/94," noted the decision as follows: "ORDER AND DECISION 21 ENTERED, Judge Hamblen. Dec. entered 2/23/94 is vacated." Id. 22 The Notice of Deficiency 23 The Internal Revenue Code (the "IRC" or the "Code") 24 provides a one-year period of limitations after a Tax Court 25 judgment becomes final in which the IRS may assess the taxpayer 26 for a deficiency. 26 U.S.C. § 6229(d). On July 3, 1995 -- 27 within one year after the second Tax Court decision became final, 286Part V of the Discussion, infra, contains additional

factual details with respect to payment and claims for refund that are pertinent only to the question of how much of a refund the Carrolls may be awarded. 10 but more than one year after the first Tax Court decision became 1 final -- the IRS issued a notice of deficiency to the Carrolls 2 for the tax year 1982. The notice asserted deficiencies for 3 negligence, tax motivated interest, and valuation overstatement 4 penalties under sections 6653(a) and 6659 of the IRC, 26 U.S.C. 5 §§ 6653(a) & 6659. Carroll II , 2000 WL 1819419, at *2, 2000 U.S. 6 Dist. LEXIS 17582, at *4. 7 On June 4, 1996, the Carrolls filed a claim for a 8 refund of the assessed penalties, asserting that the notice of 9 deficiency was untimely. In the preceding week, they had paid 10 $20,000 of the penalties assessed, and, within the preceding nine 11 months, they had paid more than $130,000 in other taxes and 12 interest, also with respect to the year 1982. Carroll III , 198 13 F. Supp. 2d at 337. 6 14 Proceedings in the District Court 15 On September 11, 1998, the Carrolls brought suit in the 16 United States District Court for the Eastern District of New York 17 "'for recovery of federal income tax, penalties and additions to 18 tax erroneously and illegally assessed and collected from 19 plaintiffs by defendant for the calendar year 1982.'" Carroll 20
II , 2000 WL 1819419, at *2, 2000 U.S. Dist. LEXIS 17582, at *5 21 (quoting Compl. ¶ 1). The complaint sought judgment in the 22 amount of $218,305.48, plus interest, costs, and attorney's fees. 237Although the complaint sought a penalty reimbursement of

$81,079.16, Carroll II , 2000 WL 1819419, at *2, 2000 U.S. Dist. LEXIS 17582, at *4-*5, it is undisputed that the Carrolls actually paid $81,391.95, including interest, in response to the penalty assessment, Carroll III , 198 F. Supp. 2d at 344. 11 The Carrolls challenged various aspects of the Tax Court 1 decision. Most important for purposes of this appeal is the 2 Carrolls' claim with respect to penalties and related interest 3 totaling $81,391.95, 7which were paid in response to the IRS's 4 July 3, 1995, notice of deficiency -- i.e., the notice that the 5 Carrolls argued was untimely. Id. 6 In an October 19, 1999, Memorandum and Order, the 7 district court (Denis R. Hurley, Judge ) denied a motion filed by 8 the Carrolls for partial summary judgment regarding the July 3, 9 1995, notice of deficiency. Carroll I , 1999 WL 1090814, at *1, 10 1999 U.S. Dist. LEXIS 17999, at *1 . In Carroll I , the court 11 agreed with the IRS that, because the first Tax Court decision 12 was not dated, it was never "rendered" within the meaning of 13 section 7459(c), and therefore could never have become final and 14 begun the running of the period of limitations for the IRS to 15 issue a notice of deficiency. 1999 WL 1090814, at *4, 1999 U.S. 16 Dist. LEXIS 17999, at *11. The court therefore concluded that 17 the notice was timely and denied the Carrolls' motion for partial 18 summary judgment. Id. 19 The Carrolls moved for reconsideration and, on October 20 23, 2000, the district court granted their motion for partial 21 summary judgment. Carroll II . The court held that, pursuant to 2212

26 U.S.C. §§ 7481(a)(1) and 7483, the Tax Court's first decision 1 became final ninety days after it was entered, on May 24, 1994, 2 and that once it did, the Tax Court had no jurisdiction to vacate 3 that decision. Carroll II , 2000 WL 1819419, at *8, 2000 U.S. 4 Dist. LEXIS 17582, at *24-*25. The July 3, 1995, notice of 5 deficiency was therefore time-barred under the one-year 6 limitation period of section 6229(d). Carroll II , 2000 WL 7 1819419, at *5, 2000 U.S. Dist. LEXIS 17582, at *15. 8 The IRS then moved for reconsideration, arguing, inter 9 alia, that section 6511(b)(2)(B) of the IRC, 26 U.S.C. 10 § 6511(b)(2)(B), limits the Carrolls' refund of contested 11 penalties to the portion of the penalties that the Carrolls paid 12 in the two years immediately preceding their filing of a claim 13 for a refund of those penalties. In a Memorandum Opinion and 14 Order dated September 13, 2001, the district court agreed with 15 the IRS that the refund to which the Carrolls were entitled was 16 limited to $20,000. Carroll III , 198 F. Supp. 2d at 349. 17 In a judgment dated February 23, 2002, the district 18 court awarded the Carrolls $20,000 plus statutory interest with 19 respect to the penalties; $2,248.21 plus statutory interest for 20 income averaging in 1982; and $7,329.27 plus statutory interest 21 as a pro rata reduction of the assessed additions for tax22 motivated interest. 23 The IRS appeals; the Carrolls cross-appeal. 2413 DISCUSSION 1
I. Standard of Review 2 We review the district court's grant of summary 3 judgment de novo
. See Steel Partners II, L.P. v. Bell Indus., 4
Inc. , 315 F.3d 120, 123 (2d Cir. 2002). "Summary judgment is 5 appropriate only where, examining the evidence in the light most 6 favorable to the nonmoving party, the record shows that there is 7 no genuine issue as to any material fact and that the moving 8 party is entitled to judgment as a matter of law." Id. 9 (citations, internal quotation marks, and alterations omitted); 10
see alsoFed. R. Civ. P. 56(c). Our review under these standards 11 is facilitated where, as here, the factsare not in dispute. Cf. 12
Steel Partners II , 315 F.3d at 122-23. 13 II. Principal Applicable Statutory Provisions 14 The principal statutory provisions, the interplay among 15 which is at the heart of the appeal, are the following sections 16 of Title 26 of the United States Code: 17 § 6229. Period of limitations for making 18 assessments 19 (a) General rule.--Except as otherwise 20 provided in this section, the period for 21 assessing any tax imposed by subtitle A with 22 respect to any person which is attributable 23 to any partnership item (or affected item) 24 for a partnership taxable year shall not 25 expire before the date which is 3 years after 26 the later of-- 27 (1) the date on which the partnership 28 return for such taxable year was filed, 29 or 3014 (2) the last day for filing such 1 return for such year (determined without 2 regard to extensions). 3

. . . 4 (d) Suspension when Secretary makes 5 administrative adjustment.--If notice of a 6 final partnership administrative adjustment 7 with respect to any taxable year is mailed to 8 the tax matters partner, the running of the 9 period specified in subsection (a) (as 10 modified by other provisions of this section) 11 shall be suspended-- 12 (1) for the period during which an 13 action may be brought under section 6226 14 (and, if a petition is filed under 15 section 6226 with respect to such 16 administrative adjustment, until the 17 decision of the court becomes final), 18 and 19 (2) for 1 year thereafter. 20 * * * 21 § 7459. Reports and decisions 22

. . . 23 (c) Date of decision.--A decision of the 24 Tax Court (except a decision dismissing a 25 proceeding for lack of jurisdiction) shall be 26 held to be rendered upon the date that an 27 order specifying the amount of the deficiency 28 is entered in the records of the Tax Court 29 or, in the case of a declaratory judgment 30 proceeding under part IV of this subchapter 31 or under section 7428 or in the case of an 32 action brought under section 6226, 6228(a), 33 6234(c), 6247, or 6252 the date of the 34 court's order entering the decision. . . . 35 * * * 36 § 7481. Date when Tax Court decision becomes 37 final 38 (a) Reviewable decisions.--Except as 39 provided [in subsections not relevant to this 40 appeal], the decision of the Tax Court shall 41 become final-- 42 (1) Timely notice of appeal not 43 filed.--Upon the expiration of the time 4415 allowed for filing a notice of appeal, 1 if no such notice has been duly filed 2 within such time . . . . 3 * * * 4 § 7483. Notice of appeal 5 Review of a decision of the Tax Court 6 shall be obtained by filing a notice of 7 appeal with the clerk of the Tax Court within 8 90 days after the decision of the Tax Court 9 is entered. . . . 10 III. Whether the Notice of Deficiency Was Timely 11 The Tax Equity and Fiscal Responsibility Act of 1982 12 ("TEFRA"), Pub. L. No. 97-248, 96 Stat. 324 (codified as amended 13 in scattered sections of 26 U.S.C.), establishes uniform 14 procedures for taxation of partnerships. TEFRA requires, among 15 other things, that the tax treatment of "partnership items" –- 16 "item[s] required to be taken into account for the partnership's 17 taxable year" –- must be determined at the partnership level. 26 18 U.S.C. § 6231(a)(3). As tax matters partner for the Stevens 19 partnership, acting for the partnership, Sam Winer entered into a 20 settlement with the IRS for the final adjustment of the taxes 21 related to Stevens. After Winer's settlement was reduced to 22 judgment by the Tax Court, a partnership-level appeal to that 23 judgment had to be brought in Tax Court within ninety days; if 24 the partnership did not appeal, the decision would become final 25 upon the expiration of the ninety-day period. Id. §§ 7481(a)(1), 26 7483. No such appeal was taken. The judgment then became final, 27 and no individual Stevens partner could thereafter contest the 28 taxes and interest determined in that partnership-level 298Although 26 U.S.C. § 6665(a)(2) provides that the term

"tax" in the IRC "shall be deemed also to refer to the additions to the tax, additional amounts, and penalties provided by [Chapter 28 of the IRC]," as we discuss later, infraPart V, for the purposes of clarity in this opinion we do not use the word "tax" to include "penalties," unless we expressly so indicate.

9Individually assessed penalties are called "affected items" because, although they must be determined at the partner level, they are affected by partnership items. 26 U.S.C. § 6231(a)(5). For example, a partner may be liable for penalties pursuant to section 6653 if his underpayment of tax is due in part to negligence. Thus, penalties must be determined at the partner level, rather than the partnership level. See id. § 6230(a)(2)(A)(i). 16 proceeding. See Monti v. United States , 223 F.3d 76, 79 (2d Cir. 1 2000). 8 2 Unlike taxes and related interest, penalties 9are 3 determined on an individual partner level. The IRS asserts such 4 a claim by sending individualized notices of deficiency to the 5 partners who the IRS contends are subject to penalties. 26 6 U.S.C. § 6212; Chimblo v. Comm'r, 177 F.3d 119, 121 (2d Cir. 7 1999), cert. denied, 528 U.S. 1154 (2000). The IRS must issue 8 any notices of deficiency within one year of the date upon which 9 the partnership-level judgment becomes final. See26 U.S.C. 10 § 6229(d). An individual partner may then challenge his or her 11 notice of deficiency by paying the assessment and bringing suit 12 for a refund in district court, or, if the partner does not first 13 pay the assessment, by seeking relief in Tax Court. See Flora v. 14 United States , 357 U.S. 63, 74-75 (1958). 15 As we have noted, the Tax Court's first decision in 16 this matter was signed, served on the parties, and stamped 1717

"SERVED FEB 23, 1994," but no date was printed after the word 1 "Entered:" following the chief judge's signature at the foot of 2 the decision. The chief judge therefore issued a second decision 3 on June 6, 1994, after the first decision (if it was valid and 4 effective) became final. The second decision attributed the 5 omission of the "requisite 'Entered' date" on the first decision 6 to a "clerical error," vacated and set aside the first decision, 7 and repeated the first decision in haec verba, except that the 8 date of service was June 6, 1994, and the date line at the foot 9 of the document, marked "Entered:", was completed. Carroll II , 10 2000 WL 1819419, at *2, 2000 U.S. Dist. LEXIS 17582, at *3-*4

. 11 Because there was no appeal from the first decision, it 12 is undisputed that, if that decision was effective despite the 13 missing date, then it became final pursuant to sections 7481 and 14 7483 ninety days after that date -- on May 24, 1994 -- and the 15 IRS's time to issue a notice of deficiency to the individual 16 Stevens partners, including the Carrolls, under section 6229(d) 17 expired one year later -- on May 24, 1995. The notice of 18 deficiency was not in fact issued until July 3, 1995, long after 19 that limitations period had ended. But if the first decision was 20 ineffective because of the absence of an entry date, and the 21 second decision which had an entry date of June 6 was the 22 effective one, then the time for the IRS to issue the deficiency 23 notice did not expire until early September 1995, and the IRS's 24 July 3 notice of deficiency to the Carrolls was timely. 2518 Section 7481 of the Code is entitled "Date when Tax 1 Court decision becomes final" and provides in relevant part that 2 "the decision of the Tax Court shall become final . . . [u]pon 3 the expiration of the time allowed for filing a notice of 4 appeal." 26 U.S.C. § 7481(a). Section 7483 limits the time in 5 which to file for review of a Tax Court decision to "90 days 6 after the decision of the Tax Court is entered." Id. § 7483. 7 The Carrolls argue that the first decision was 8 "entered" under section 7483 when, on February 23, 1994, having 9 been signed, it was served and entered into the court's docket, 10 and that it therefore became final ninety days after that -- on 11 May 24, 1994. Agreeing with the district court, they assert that 12 the Tax Court had no authority under these circumstances to 13 vacate the first decision once it became final, see Carroll II , 14 2000 WL 1819419, at *8, 2000 U.S. Dist. LEXIS 17582, at *24-*25 15 (citing cases), and that, even if the Tax Court could vacate its 16 first decision, then its second decision, by merely correcting a 17 clerical error, could not restart the limitations period for the 18 issuance of the notice of deficiency. Carroll III , 198 F. Supp. 19 2d at 342-43 & n.4 (citing Lieberman v. Gulf Oil Corp. , 315 F.2d 20 403, 404 (2d Cir.), cert. denied, 375 U.S. 823 (1963)). We 21
agree. 22 The IRS does not contest the meaning of 23 sections 7481(a) and 7483. It argues instead that 26 U.S.C. 24 § 7459(c) establishes a necessary additional step before a 25 decision becomes final in an action under section 6226, the type 2619

of action that resulted in the first and second decisions. The 1 crucial statutory language reads: 2 Date of decision.--A decision of the Tax 3 Court . . . shall be held to be renderedupon 4 the date that an order specifying the amount 5 of the deficiency is entered in the records 6 of the Tax Court or, in the case of a 7 declaratory judgment proceeding . . . or in 8 the case of an action brought under section 9 6226 , 6228(a), 6234(c), 6247, or 6252 the 10 date of the court's order entering the 11 decision

. 12 26 U.S.C. § 7459(c) (emphasis added). The IRS argues that this 13 provision distinguishes between (1) the generally applicable date 14 of rendering for deficiency judgments brought in Tax Court; and 15 (2) the date of entry "in the case of . . . action[s] brought 16 under section 6226," id.§ 7459(c), such as the first and second 17 Tax Court decisions. For the first group of judgments, the 18 decision is rendered on the "date that an order specifying the 19 amount of the deficiency is entered in the records of the Tax 20
Court." Id.For the second group, including the decisions in 21 this case, the decision is rendered on "the date of the court's 22 order entering the decision." Id.The IRS argues that this 23 variation in language is important in light of the canon of 24 statutory interpretation that urges against treating any words as 25 superfluous. See, e.g. , Mountain States Telephone & Telegraph 26
Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249 (1985). 27 The IRS's argument proceeds as follows: Because 28 section 7459(c) uses different language with respect to dating 29 the first group of judgments from that used for the second group 3020

(which includes the judgments at issue in this case), the 1 language variation must be meaningful. In contrast to the (group 2 1) phrase "the date that an order . . . is entered in the 3 records," the (group 2) phrase "the date of the court's order 4 entering the decision" means the date printed on the "Entered:" 5 line of the decision. Since a section 6226 decision is within 6 the second group, if it does not have a date on its "Entered:" 7 line, then it has not been rendered. Since it has not been 8 rendered, it has not been validly entered. Thus, the first Tax 9 Court decision, having no date on the "Entered:" line, was not 10 rendered; having not been rendered, it was not entered; having 11 not been entered, it was never "final"; and any time limitation 12 with respect it therefore never began to run. The second 13 decision, by contrast, had a date on the "Entered:" line; was 14 rendered and thus validly "entered"; became final ninety days 15 after its entry; and began the running of the applicable 16 limitations periods on June 6, 1994. There were then ninety days 17 during which an appeal could be brought before it became final, 18 and one year thereafter during which the IRS could issue 19 deficiency notices to the Carrolls and other Stevens partners. 20 The IRS's argument has the support of the other Circuit to 21 consider this claim by a former Stevens partner. See Conway v. 22 United States , 50 Fed. Cl. 273 (2001), aff'd, 326 F.3d 1268 (Fed. 23 Cir. 2003). We nonetheless disagree. 24 Section 7459(c) does not say that the decision of the 25 Tax Court in cases such as this one is rendered on "the date on 2610The IRS's interpretation of section 7459(c) to the

effect that section 6226 decisions are "rendered" when the effective date is written on it does not comport with common sense or any meaning of the term of which we are aware. While expressing doubts as to whether the terms "rendering" and "entering" are used with "technical accuracy" in the statutes governing federal appeals, the Fifth Circuit offered the following observations: "Strictly speaking, a judgment is rendered when finally published by the judge orally or in writing according to the practice of the court, and is entered when spread by the clerk upon the record or noted and filed among the papers of the court, according to its practice." In re Hurley Mercantile Co. , 56 F.2d 1023, 1024 (5th Cir.), cert. denied, 286 U.S. 555 (1932); see alsoBlack's Law Dictionary 1298 (7th ed. 1999) (defining "render" as "([o]f a judge) to deliver formally"). The moment of rendering is a moment of formal pronouncement. Thus, under section 7459(c), the "date of the court's order entering the decision" might be the date that the judge signed the order or issued the order, or the date that the order was docketed, or perhaps in theory the date (if ever) that the court delivered the order orally, but it cannot be the date written at the foot of the document or the date (if ever) on which that writing took place. 21 the court's order entering the decision," it says that the 1 decision is rendered on "the date ofthe court's order entering 2 the decision." To be sure, "the date onthe court's order 3 entering the decision" might be construed to be the date on the 4 "Entered:" line, and there was none on the first decision. But 5
"the date ofthe court's order entering the decision," using the 6 plain import of the term, could have been no later than the date 7 on which the decision was signed by the chief judge, docketed, 8 and served on the parties. It is undisputed that that date was 9 February 23. 10 10 We do not doubt that the difference between the 11 language in the first and second clauses of section 7459 has 12 meaning. There may well be circumstances in which "the date that 1311The IRS acknowledges that, if the first Tax Court

decision was valid, then the Tax Court lacked jurisdiction to vacate it after the passing of ninety days without an appeal made it final. Appellant's Br. at 25. 22 an order specifying the amount of the deficiency is entered in 1 the records of the Tax Court" may differ from "the date of the 2 court's order entering the decision," and that the latter, not 3 the former, applies to decisions under section 6226 such as the 4 ones now before us. The notion, however, that the "the date of 5 the court's order entering [a] decision," depends not on its 6 signing, docketing, or service, but on the completion of the sub7 administrative task of stamping the date at the bottom of the 8 decision seems to us to border on the frivolous. 9 The IRS's argument that the first Tax Court decision 10 was not validly entered, because not validly rendered under 11 section 7459(c), therefore fails. The first Tax Court decision 12 became final ninety days after February 23, 1994. Once the first 13 decision became a valid final decision, the Tax Court had no 14 jurisdiction to vacate it under these circumstances

. 11 See, 15
e.g. , Lasky v. Comm'r, 235 F.2d 97, 98-100 (9th Cir. 1956) 16 (holding, at a time when the Tax Court was an agency rather than 17 a court, that it lacked the power to vacate its own decisions), 18 aff'd per curiam, 352 U.S. 1027 (1957); Abatti v. Comm'r, 859 19 F.2d 115, 117-18 (9th Cir. 1988) (holding that, although now an 20 Article I court, the Tax Court lacks the equitable power to 21 vacate its own decisions except under limited circumstances such 22 as fraud on the court); see also Vibro Mfg. Co. v. Comm'r, 312 2323

F.2d 253, 254 (2d Cir. 1963) (per curiam) (observing that the 1 failure to file a petition for redetermination within 90 days of 2 the mailing of the notice of deficiency is a "jurisdictional 3 defect" and that the 90-day period to file an appeal under 4 section 7483 is an "absolute" restriction, and holding that 5 failure to comply with the latter deprives this Court of 6 jurisdiction); Drobny v. Comm'r, 113 F.3d 670, 677-79 (7th Cir.) 7 (explaining that the Tax Court may vacate a valid final decision 8 "only in certain narrowly circumscribed situations" (internal 9 quotation marks omitted)), cert. denied, 522 U.S. 916 (1997); cf. 10 Senate Realty Corp. v. Comm'r, 511 F.2d 929, 931 n.1 (2d Cir. 11 1975) (noting that the Tax Court may vacate a valid final 12 decision on the grounds of fraud upon the Tax Court). The second 13 Tax Court decision was therefore a nullity, at least for purposes 14 of calculating the time in which to file an appeal or a notice of 15 deficiency, and the limitations period expired on May 24, 1995, 16 long before the IRS issued the notice of deficiency. 17 Moreover, even if the Tax Court did have jurisdiction 18 to vacate and then re-enter its decision, we do not think that 19 that act would restart the statute of limitations. The Tax Court 20 stated that it was correcting "an inadvertent clerical error" and 21 then repeated the first Tax Court decision in haec verba, with 22 the "clerical error" -- the omission of the "Entered:" date –- 23 corrected. Because the court merely "reentered or revised [the 24 first decision] in an immaterial way," the second decision "does 25 not toll the time within which review must be sought." FTC v. 2624

Minneapolis-Honeywell Regulator Co. , 344 U.S. 206, 211 (1952); 1
cf. Lieberman v. Gulf Oil Corp. , 315 F.2d 403, 404 (2d Cir.) 2 (holding that the entry of an order correcting a technical 3 mistake in a judgment pursuant to Fed. R. Civ. P. 60(a) did not 4 restart the time for appeal), cert. denied, 375 U.S. 823 (1963). 5 The Court of Federal Claims, in Conway II , 326 F.3d at 6 1276-77, decided that such a conclusion was inconsistent with the 7 "practical" approach of Honeywelland its progeny. Again we 8 disagree. In Honeywell , the Supreme Court considered the 9 timeliness of a petition for certiorari filed within the 10 ninety-day filing period after the Seventh Circuit had issued a 11 "final decree" that did not touch on the substance of an earlier 12 decision which formed the basis for the petition for certiorari, 13 but outside the ninety-day filing period after the Seventh 14 Circuit had issued a certified copy of the earlier judgment. 344 15 U.S. at 208-10. The Supreme Court held that the petition was 16 untimely because the final decree did not alter the substance of 17 the earlier decision, so it did not restart the limitations 18 period. The Court observed: 19 While it may be true that the Court of 20 Appeals had the power to supersede the 21 [earlier] judgment . . . with a new one, it 22 is also true, as that court itself has 23 recognized, that the time within which a 24 losing party must seek review cannot be 25 enlarged just because the lower court in its 26 discretion thinks it should be enlarged. 27 Thus, the mere fact that a judgment 28 previously entered has been reentered or 29 revised in an immaterial way does not toll 30 the time within which review must be sought. 31 Only when the lower court changes matters of 3212This case is in no way similar to Scofield v. NLRB, 394

U.S. 423, 427 (1969), in which the parties received no notice that judgment was entered. It also differs significantly from Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227 (3d Cir. 1991), in which the initial order contained inconsistent paragraphs variously certifying the order for interlocutory appeal and as a final judgment, thereby making it "difficult for defendant's counsel to determine how the order 25 substance, or resolves a genuine ambiguity, 1 in a judgment previously rendered should the 2 period within which an appeal must be taken 3 or a petition for certiorari filed begin to 4 run anew. 5
Id.at 211-12 (footnotes containing citations omitted). The 6 Court continued: "The test is a practical one. The question is 7 whether the lower court, in its second order, has disturbed or 8 revised legal rights and obligations which, by its prior 9 judgment, had been plainly and properly settled with finality." 10
Id.at 212. In this case, the Tax Court's second decision did 11 not alter, let alone disturb or revise, the legal rights and 12 obligations of the parties; the second decision merely restated 13 the first while correcting a clerical error. 14 The IRS's argument might prevail if the first decision 15 was a nullity and therefore gave rise to no legal rights or 16 obligations; then, the second decision might be viewed as 17 disturbing or revising an ineffective first decision. As we have 18 already discussed, however, we think that a Tax Court order and 19 decision that is signed by the judge, served and docketed, and 20 completed except for the "Entered:" date, is "rendered" and is 21 effective. The absence of the date at the foot of the document 22 does not render it a nullity. 12 23should be appealed." Id.at 1231 n.2. While we agree with the

Federal Circuit that "Honeywellhas been applied to extend the time of appeal when there was an ambiguity as to the legal effect of a court's order," Conway II , 326 F.3d at 1276, we do not think that the failure to stamp the date created any ambiguity as to the legal effect of the first Tax Court decision, or even as to its date, since it was clearly marked, "SERVED FEB 23 1994." 26 In the final analysis, any consideration of Honeywell 1 "practicality" must work against the IRS. While we understand 2 the IRS's desire to construe the first decision of the Tax Court 3 to be without effect so as to render timely its tardy notice of 4 deficiency, there is nothing practical about the notion that a 5 decision otherwise final but, as a result of a clerical error, 6 missing the "Entered:" date is a nullity. Were that the case, 7 the limitations periods for both taxpayer and the IRS with 8 respect to such a decision would run indefinitely until either 9 someone caught the error or some other limitations period, if 10 any, took effect. We can see nothing "practical" about creating 11 that sort of administrative limbo. 12 We therefore conclude that the first Tax Court decision 13 was validly rendered and entered no later than February 23, 1994; 14 the one-year period in which the IRS could issue a notice of 15 deficiency began to run ninety days later, when the decision 16 became final; the second Tax Court decision did not restart the 17 limitations clock; and the notice of deficiency issued by the IRS 18 on July 3, 1995, was therefore untimely. 1927 IV. Whether the Carrolls' Suit Is Barred under the 1 Doctrine of Res Judicata 2 The IRS argues that the Carrolls' claim of untimeliness 3 is barred by the doctrine of res judicata because all issues 4 related to the Tax Court judgment were resolved in the Tax 5 Court's second decision or should have been resolved through an 6 appeal from it. The IRS contends that the second Tax Court 7 decision resolved the questions of whether the first decision was 8 valid under section 7459(c) and therefore of when the one-year 9 limitations period for the notices of deficiency started to run. 10 According to the IRS, the second decision held that the first 11 decision was a legal nullity because otherwise the Tax Court 12 would have lacked jurisdiction to vacate it more than ninety days 13 later. As the second decision was a partnership-level 14 determination, the IRS asserts that these issues should have been 15 contested at the partnership level through an appeal from the Tax 16 Court's second decision, because each partner who does not opt 17 out "'is bound by the results of' the partnership proceeding." 18 Appellant's Br. at 22 (quoting Monti v. United States , 223 F.3d 19 76, 79 (2d Cir. 2000)). 20 The district court rejected this argument. First, the 21 court reasoned that the Carrolls' action is not a collateral 22 attack on the jurisdiction of the Tax Court, but rather "an 23 attack on the IRS's interpretation of the legal effect of the 24 June 1994 Decision as restarting the clock on the time period 25 within which the IRS was required to serve its notice of 2628

deficiency upon Plaintiffs." Carroll III , 198 F. Supp. 2d at 342 1 (citing Banque Nationale De Paris v. 1567 Broadway Ownership 2
Assocs. , 248 A.D.2d 154, 155, 669 N.Y.S.2d 568, 569 (1st Dep't 3 1998)). Second, the court concluded that, even if the Tax Court 4 had jurisdiction to enter the second decision, that second 5 decision did not deprive the first decision of its finality or 6 restart the one-year limitations period for the notice of 7 deficiency. Id.at 342-43. Finally, the district court noted 8 that "the adoption of the IRS's position on this point would 9 require of these Plaintiffs remarkable prescience [because the] 10 Plaintiffs were not aggrieved by the June 1994 Decision until 11 July 3, 1995 (the date the IRS relied upon that decision to 12 issue, in untimely fashion, a notice of deficiency)," id. at 343 13 n.6, long after the Carrolls' right to appeal the Tax Court's 14 decision had expired. 15 We agree with the district court. The Carrolls' suit 16 is not a challenge to the Tax Court's second decision, but a 17 challenge to the timeliness of the IRS's notice of deficiency. 18 The Carrolls' rights were affected by the actions of the IRS on 19 July 3, 1995, when it issued the notice of deficiency, and not 20 before. By the time the Carrolls received the notice, the 21 ninety-day period for appealing the Tax Court decision had long 22 since expired. Prior to that time, there was no certainty that 23 the IRS would issue them a notice of deficiency, still less that 24 the IRS would issue them an untimely one. In general terms, 2529 [u]nder the doctrine of res judicata, or 1 claim preclusion, a final adjudication on the 2 merits of an action precludes the parties or 3 their privies from relitigating issues that 4 were or could have been raised in that 5 action

. Said differently, upon a final 6 judgment on the merits, parties to a suit are 7 barred as to every matter that was offered 8 and received to sustain or defeat a cause of 9 action, as well as to any other matter that 10 the parties had a full and fair opportunity 11 to offer for that purpose. 12
Bank of India v. Trendi Sportswear, Inc. , 239 F.3d 428, 439 (2d 13 Cir. 2000) (citations, quotation marks, and alterations omitted; 14 second emphasis added). Neither the validity of the first 15 decision nor the running of the limitations period "were or could 16 have been raised" in the Tax Court or on appeal from it. We 17 therefore conclude that the Carrolls' suit is notbarred by the 18 doctrine of res judicata. 19
In Conway I , the Court of Federal Claims rejected the 20 IRS's argument that the taxpayer was barred by res judicata from 21 bringing such a suit, 50 Fed. Cl. at 280, but concluded that 22 principles of comity required deference to the validity of the 23 Tax Court's second decision, id. at 281. That conclusion was 24 based on the fact that the Stevens partners, by bringing an 25 action against the IRS with respect to the timeliness of its 26 notice of deficiency, are attacking the Tax Court's second 27 decision collaterally, and principals of comity dictate against 28 such collateral attacks on decisions of the Tax Court. But, as 29
the Conway Icourt noted, a collateral bar does not apply to 30 judgments issued without jurisdiction. 50 Fed. Cl. at 281 3130

(citing Johnson v. Manhattan Ry. Co. , 289 U.S. 479, 495-96 (1933) 1 ("[A collateral] attack can be successful only where and to the 2 extent that it discloses a want of power as distinguished from 3 error in the exertion of power that was possessed.")). Since the 4 Tax Court lacked jurisdiction to issue the second decision, 5

see supraPart III, principles of comity do not stay our hand. 6 Moreover, even if the Tax Court did have jurisdiction 7 to enter the second decision, it was a non-substantive 8 housekeeping document that did not restart the statutory 9 limitations period. See id. Far from overriding the second 10 decision contrary to principles of comity, then, we resolve this 11 case in a manner consistent with both the first and second Tax 12 Court decisions by holding that the first was effective no later 13 than February 23, 1994, that the second cured a clerical error 14 but did not restart the limitations period, and that the notice 15 of deficiency was therefore untimely. The Carrolls' suit is not 16
barred. 17
V. The Amount of the Refund 18 In its second reconsideration of the case, the district 19 court granted the Carrolls only $20,000 of the $81,391.95 penalty 20 reimbursement that they sought in their motion for partial 21 summary judgment. Carroll III , 198 F. Supp. 2d at 348-49. The 22 Carrolls cross-appeal from this decision. 23
A. Additional Background 24
Carroll IIIrecounts in detail the relevant forms and 25 responses that passed between the IRS and the Carrolls. 198 F. 2631

Supp. 2d at 337-41. We therefore supply only those facts 1 necessary to explain the background to our resolution of the 2 cross-appeal. 3 The July 3, 1995, notice of deficiency assessed 4 $59,043.27 in penalties : $51,357.27 for negligence and $7,686 for 5 overvaluation. By the time the Carrolls paid the entirety of 6 that assessment, however, interest had increased the total to 7 $81,391.95. 8 On July 17, 1995, the Carrolls were also assessed 9 Stevens-related taxes and interest totaling $131,626.54. This 10 sum consisted of "partnership items" -- i.e., items that had been 11 determined in the partnership-level proceeding and that did not 12 require an individualized notice of deficiency. 13 Through a Form 1040X and a Form 843, both dated May 29, 14 1996, the Carrolls sought to amend their 1982 joint tax return; 15 to request a partial refund of $32,138 of the more than $130,000 16 of Stevens-related taxes and interest for 1982 that they had paid 17 in full in the preceding nine months; and to request a refund of 18 the assessed penalties for 1982. Carroll II , 2000 WL 1819419, at 19 *2, 2000 U.S. Dist. LEXIS 17582, at *5; Carroll III , 198 F. Supp. 20 2d at 337-38. On June 3, 1996, the Carrolls paid $20,000 toward 21 the penalties owed for 1982. Id. at 337. The Carrolls' forms 22 were received by the IRS on June 4, 1996. Id. By the time the 23 IRS received the Carrolls' claim for penalty reimbursement, then, 24 they had paid only $20,000 of the contested penalties for 1982 , 2532

but had paid more than $130,000 for taxes and interest for that 1
year. See id. 2 After receiving a letter from the IRS dated September 3 13, 1996, which the Carrolls thought was a denial of their 4 request for an abatement of the penalties covered by the notice 5 of deficiency, the Carrolls paid the remainder of the penalties. 6 Compl. ¶ 63; see Carroll III , 198 F. Supp. 2d at 348. The 7 Carrolls did not, at any time prior to their initiation of this 8 lawsuit, file an amended Form 843 request for refund of those 9 penalties to indicate the updated information that they had paid 10 all of the penalties owed. 11 The district court decided that under 26 U.S.C. 12 § 6511(b)(2)(B) the Carrolls can recover only $20,000 -- the 13 amount of the contested penalties that they had paid before 14 filing their May 29, 1996, Form 843 -- and not the remaining 15 $61,391.95 in contested penalties that they paid since they filed 16 that Form 843. Carroll III , 198 F. Supp. 2d at 348-49. 17
B. Analysis 18 The so-called "look-back" rule of section 6511(b)(2)(B) 19 provides, in relevant part, that "the amount of the credit or 20 refund shall not exceed the portion of the tax paid during the 2 21 years immediately preceding the filing of the claim." The 22 government argues that section 6511(b)(2)(B) permits a refund 23 only of the contested penalties paid by the Carrolls within the 24 two years preceding their claim for a refund of the 1982 25 penalties, which was received by the IRS on June 4, 1996. The 2613The parties disagree about the grounds of the district

court's holding on this point. The Carrolls urge us to read the district court's opinion as an improper application of the "prior claim rule" of 26 U.S.C. § 7422(a), whereas the government disavows the relevance of the prior-claim rule and construes thedistrict court as holding in its favor on the basis of the lookback rule of 26 U.S.C. § 6511(b)(2)(B). Because the governmentargues only that recovery is limited to $20,000 under the lookback rule, we consider only the application of section 6511(b)(2)(B). 33 government urges us to affirm the district court's decision to 1 limit the Carrolls' recovery to $20,000 on this ground. 13 2 We decline to do so. There is nothing in the language 3 of section 6511(b)(2)(B) that limits "the tax paid" to the 4 particular penalties disputed in the claim, nor has the 5 government cited any cases so interpreting it. On the contrary, 6 the Code expressly defines "tax" to include penalties and 7 interest. See26 U.S.C. § 6665(a)(2) ("[A]ny reference in this 8 title to 'tax' imposed by this title shall be deemed also to 9 refer to the additions to the tax, additional amounts, and 10 penalties provided by this chapter."); id. § 6601(e)(1) ("Any 11 reference in this title (except subchapter B of chapter 63, 12 relating to deficiency procedures) to any tax imposed by this 13 title shall be deemed also to refer to interest imposed by this 14 section on such tax."). The "tax paid" therefore refers to the 15 sum of taxes, penalties, and interest paid for the tax year in 16 question. In the absence of textual, doctrinal, or policy 17 argument to the contrary, we so interpret section 6511(b)(2)(B) 18 in the context of the Carrolls' claim. 1934 In the two years immediately preceding June 4, 1996, 1 the Carrolls paid more than $130,000 in taxes and interest for 2 the year 1982 and they paid $20,000 in related penalties. This 3 amount of 1982 taxes, as defined in sections 6665(a)(2) and 4 6601(e)(1), substantially exceeds the sum of the penalty 5 reimbursement, $81,391.95, that the Carrolls seek in this suit. 6 We therefore conclude that the Carrolls are entitled to a full 7 refund of the penalties paid in connection with the untimely 8 notice of deficiency. 9
CONCLUSION 10 For the foregoing reasons, we affirm the district 11 court's grant of partial summary judgment to the Carrolls on 12 their claim for a refund of penalties from the year 1982 on the 13 ground that the notice of deficiency was untimely. We vacate the 14 district court's decision awarding the Carrolls only $20,000 of 15 the penalties sought, and we remand to the district court for the 16 entry of judgment awarding the Carrolls their full reimbursement. 17