T.C. Summary Opinion 2001-178

UNITED STATES TAX COURT

DENNIS J. LAWLESS, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1926-00S. Filed November 28, 2001.

Dennis J. Lawless, pro se.

John E. Glover, for respondent.

THORNTON, Judge: This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed. The decision to be entered is not

reviewable by any other court, and this opinion should not be

cited as authority. Unless otherwise indicated, all subsequent

section references are to the Internal Revenue Code in effect for

the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.
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1 On brief, respondent concedes the sec. 6662 penalty and

also concedes adjustments in the notice of deficiency increasing

petitioner’s taxable income by $33 of interest income and $317 of

wages. 

A handwritten statement that is included among the parties’

stipulations (but that is initialed only by respondent’s counsel)

indicates that petitioner concedes that he is not entitled to a

$27 deduction for bank fees, as allowed in the notice of

deficiency. Assuming that the stipulation is not binding on

petitioner, who never initialed it, we nevertheless deem

petitioner to have conceded that he is not entitled to the $27

deduction, having never claimed this deduction on his 1997 income

tax return in the first instance and having failed to address the

issue before, during, or after the trial. 

 Although petitioner’s 1997 income tax return reflects a

claimed deduction of $5,807 for a contribution to an individual

retirement account (IRA), at trial petitioner testified that he

was not claiming an IRA deduction and that he had left this line

blank on his 1997 tax return as filed. Accordingly, we deem

petitioner to have conceded that he is not entitled to any IRA

deduction. 

Respondent determined a $5,762 deficiency in petitioner’s

1997 Federal income tax and a $1,150 accuracy-related penalty

pursuant to section 6662. 

After concessions,1 the issues for decision are: (1)

Whether petitioner is subject to the section 72(t) 10-percent

additional tax on an early distribution from a section 401(k)

retirement plan; and (2) whether respondent properly determined a

deficiency based upon an amount erroneously refunded to

petitioner after an erroneous abatement of petitioner’s entire

1997 tax liability.
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2 It is unclear from the record exactly what data petitioner

placed on his 1997 Federal income tax return and what data might

have been placed on the return by respondent’s agents based on

information reports that petitioner attached to his return and

that reflect all the income items listed on the return. Some of

the handwritten numerical entries in the formatted columns on

petitioner’s Form 1040, U.S. Individual Income Tax Return, are

written over. Other numerical entries, in a different hand,

appear in the margins. Petitioner testified that “I just put my

name down, my address. I stapled the return to it. * * * I never

done put any figures down.” Respondent does not contend that

petitioner failed to file a valid 1997 U.S. individual income tax

return. Cf. secs. 6011 and 6012.

Background

The parties have stipulated some of the facts, which we

incorporate herein by this reference. When he petitioned the

Court, petitioner resided in Knoxville, Tennessee. 

During 1997, petitioner received an $11,747 distribution

from the Denso Associates’ 401(k) Retirement Plan (the Denso Plan

distribution). Petitioner was then 42 years old. He deposited

no portion of the Denso Plan distribution into another qualified

plan. 

On his 1997 Federal income tax return, filed April 15, 1998,

petitioner did not compute his tax liability but rather elected

to have respondent compute it. Petitioner’s 1997 tax return

lists the $11,747 Denso Plan distribution as taxable income, in

addition to $22,168 of wages and $372 of unemployment

compensation. Petitioner’s 1997 tax return also shows total

Federal income tax withheld of $5,807.2 
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3 As previously stated, the actual amount of taxable wages

shown on petitioner’s 1997 tax return was $22,168. The record

contains no explanation of the apparent discrepancy. The notice

of deficiency also adjusted petitioner’s taxable income to

reflect various items which the parties have now conceded, as

previously indicated. The notice of deficiency did not include

in petitioner’s taxable income (or make any reference to) the

$372 of unemployment compensation shown as taxable income on

petitioner’s 1997 return. As any error in this regard operates

to petitioner’s benefit, and as the parties have not alluded to

this item, we give it no further consideration.

On May 25, 1998, respondent assessed petitioner’s 1997

income tax liability as $7,219 and credited petitioner with

$5,807 of taxes withheld and paid on his behalf. On July 6,

1998, without explanation, respondent abated the entire $7,219 of

previously asssessed tax liability and issued petitioner a refund

of $5,884, reflecting the $5,807 of withheld taxes plus $77 of

accrued interest. 

In the notice of deficiency, issued November 23, 1999,

respondent determined that petitioner had taxable income which

included, among other things, $22,166 of taxable wages shown on

petitioner’s 1997 tax return.3 The notice of deficiency did not

include in petitioner’s taxable income any part of the $11,750

Denso Plan distribution. Respondent determined that petitioner’s

tax liability on the taxable income so determined was $4,587 and

that he also owed $1,175 as a 10-percent additional tax on an

early distribution from a qualified retirement plan, as well as a

$1,150 accuracy-related penalty. 
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Discussion

The first issue is whether petitioner is liable for the

section 72(t) 10-percent additional tax on the 1997 Denso Plan

distribution.

As a general rule, if a taxpayer receives any amount from a

section 401(k) retirement plan, the taxpayer is liable, in the

year of receipt, for a 10-percent additional tax on the portion

of the amount which is includable in gross income. Secs. 72(t),

401(a), 4974(c). This general rule is subject to a number of

exceptions. See sec. 72(t)(2). 

 In the notice of deficiency, respondent determined that 

petitioner’s taxable income included no amount from the Denso

Plan distribution. Respondent has not sought any increased

deficiency resulting from the inclusion of the Denso Plan

distribution in petitioner’s gross income and has not otherwise

alluded to this issue at trial or on brief. We deem respondent

to have conceded that the Denso Plan distribution is not

includable in petitioner’s gross income. Accordingly, petitioner

is not subject to the 10-percent additional tax on the Denso Plan

distribution. 

The second issue is whether respondent properly determined a

deficiency based upon an erroneous refund to petitioner. 

The jurisdiction of this Court is limited as specifically

authorized by statute. See Belloff v. Commissioner, 996 F.2d
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607, 611 (2d Cir. 1993), affg. T.C. Memo. 1991-350; Pen Coal

Corp. v. Commissioner, 107 T.C. 249, 254 (1996). That

authorization encompasses the redetermination of deficiencies. 

See secs. 6214, 7442; Bregin v. Commissioner, 74 T.C. 1097, 1101

(1980); Midland Mortgage v. Commissioner, 73 T.C. 902, 907

(1980). The parties do not dispute that respondent issued a

valid statutory notice of deficiency and that petitioner made a

timely petition therefrom. Therefore, we have jurisdiction to

redetermine the deficiency. See secs. 6212 and 6213; Rule 13(a),

(c); Monge v. Commissioner, 93 T.C. 22, 27 (1989); Normac, Inc.

v. Commissioner, 90 T.C. 142, 147 (1988).

It is well settled that the Commissioner may determine a

deficiency based upon an erroneous refund. See Miller v.

Commissioner, 23 T.C. 565, 568 (1954), affd. 231 F.2d 8 (5th Cir.

1956); Oilbelt Motor Co. v. Commissioner, 16 B.T.A. 831 (1929). 

The question here is whether a deficiency exists.

Section 6211(a) defines the term “deficiency” as the amount

by which the tax imposed exceeds the excess of: 

(1) the sum of–- 

(A) the amount shown as the tax by the 

taxpayer upon his return, if a return was made 

by the taxpayer and an amount was shown as the 

tax by the taxpayer thereon, plus

(B) the amounts previously assessed (or 

 collected without assessment) as a deficiency, 

 over–-

 (2) the amount of rebates, as defined in 

subsection (b)(2), made.
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4 Sec. 6014(a) authorizes the Commissioner to compute the

tax liability of a taxpayer who satisfies the criteria, inter

alia, of having gross income that is less than $10,000 and that

includes no income other than wages, dividends, or interest. 

Sec. 6014(b) directs the Commissioner to prescribe regulations to

extend this authority to cases where the taxpayer has gross

income of $10,000 or more. Pursuant to this directive, sec.

1.6014-2, Income Tax Regs., permits a taxpayer to make a sec.

6014(a) election without regard to the amount or nature of the

taxpayer’s gross income.

Under this formula, then, the deficiency is determined by

comparing the tax imposed to: (1) The tax shown on the return;

(2) amounts previously assessed as a deficiency; and (3) any

rebates made. We consider each of these elements in turn.

Tax Shown on the Return

When petitioner filed his 1997 tax return, he did not show

an amount of tax due. The parties do not dispute that petitioner

made a valid election, pursuant to section 6014(a), to have

respondent compute his tax liability.4 Respondent’s computation

of tax under section 6014 “shall be considered as having been

made by the taxpayer and the tax so computed considered as shown

by the taxpayer upon his return.” Sec. 6211(b)(3); see sec.

301.6211-1(c), Proced. & Admin. Regs.

On or about May 25, 1998, respondent computed petitioner’s

1997 tax liability as being $7,219. Accordingly, for purposes of

section 6211(a)(1)(A), the tax shown on the return is $7,219.
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Amounts Previously Assessed as a Deficiency

On May 25, 1998, respondent assessed petitioner’s tax as

$7,219. This assessment appears to have been made pursuant to

section 6201(a)(1), which authorizes summary assessment of taxes

shown on the return. This assessment was not made pursuant to

the deficiency procedures described in subchapter B of chapter 63

of the Code. See sec. 6201(e). (For discussion of the

distinction between summary assessments and deficiency

assessments, see Murray v. Commissioner, 24 F.3d 901, 902-903

(7th Cir. 1994); Meyer v. Commissioner, 97 T.C. 555, 559-560

(1991).) Accordingly, the May 25, 1998, assessment does not

constitute an “amount previously assessed * * * as a deficiency”

within the meaning of section 6211(a)(1)(B). Thus, the amounts

previously assessed as a deficiency are zero. 

Rebates

Pursuant to section 6211(b)(2), the term “rebate” means

(with qualifications not germane here) “so much of an abatement,

credit, refund, or other repayment as is made on the ground that

the income tax imposed” is less than the amount shown on the

taxpayer’s return. Sec. 301.6211-1(f), Proced. & Admin. Regs. 

On July 6, 1998, respondent abated the entire $7,219

assessment that he had previously made on May 25, 1998. Although

the record is silent as to why respondent made this abatement,

the fact that it was for the same amount as had been assessed 2
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5 The July 6, 1998, refund of $5,884 was not a separate

rebate but was merely the byproduct of the July 6, 1998,

abatement. In any event, even if the July 6, 1998, refund were

considered to be a separate rebate, it would not change the

result under sec. 6211(a). Recall that under sec. 6211(a), the

deficiency represents basically the excess of the tax imposed

over an amount representing, in this case, the amount by which

the tax shown on the return exceeds the rebate. In this case,

whether the rebate is considered to be $7,219 (the amount of the

abatement) or $13,303 (the abatement plus the refund), the tax

shown on the return will not exceed the rebate. Accordingly,

under either scenario, the deficiency would equal the amount of

tax imposed.

months earlier leads us to conclude that respondent made a

substantive recalculation of petitioner’s tax liability and

concluded (albeit erroneously) that petitioner’s tax liability

was zero. Accordingly, the abatement was a rebate under section

6211(a)(2). See Interlake Corp. v. Commissioner, 112 T.C. 103,

110 (1999); cf. Singleton v. United States, 128 F.3d 833 (4th

Cir. 1997).5

Conclusion

The sum of the amount of tax shown on petitioner’s return

($7,219) plus amounts previously assessed as a deficiency (zero)

is $7,219. This sum does not exceed the amount of rebates

($7,219). Thus, under section 6211(a), there is a deficiency

equal to the amount of the tax imposed, to be determined in the

Rule 155 computations.

To reflect the foregoing and concessions, 

Decision will be entered

under Rule 155.