T.C. Memo. 1999-121

UNITED STATES TAX COURT

RONALD W. STEWART, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 23541-97. Filed April 12, 1999.

Ronald W. Stewart, pro se.

John R. Gilbert, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

RUWE, Judge: Respondent determined deficiencies and

additions to tax in petitioner's Federal income tax as follows: 

 Additions to Tax 

Year Deficiency Sec. 6651(a)(1) Sec. 6654

1992 $30,790 $2,345 $305

1993 29,153 2,686 364

1994 23,117 1,061 111

1995 44,177 4,809 898
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1Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

Subsequent to the filing of his petition, petitioner filed

delinquent Federal income tax returns for each of the years 1992

through 1995, inclusive. Each of petitioner's returns was due on

or before April 15, following the close of the calendar year. 

Sec. 6072(a).1 The returns for each of the years 1992 through

1994, inclusive, claim credit for tax withheld from petitioner's

wages and claim an overpayment of tax for those respective return

years. Respondent accepted each of the returns as filed. As a

consequence of respondent's accepting the returns for 1992

through 1995, assessing the tax reported on the returns, and

other concessions, petitioner overpaid tax for the years 1992,

1993, and 1994. In respondent's post trial memorandum, he

concedes an overpayment of $3,067 for 1992. The amount of the

overpayment ($3,067) is the sum of a $2,993 overpayment from 1996

and the $74 overpayment that petitioner claimed on his 1992

return.

The issues for decision are: (1) Whether petitioner's

overpayments of tax for the taxable years 1993 and 1994 are

either partially or fully time barred under sections 6511(b) and

6512, and (2) whether petitioner is liable for an addition to tax

under section 6651(a)(1) for the taxable year 1995. 
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2All amounts have been rounded to the nearest dollar.

FINDINGS OF FACT

Petitioner resided in Laurel Springs, New Jersey, at the

time of filing his petition and amended petition with this Court. 

After filing his petition in this case, petitioner filed

delinquent Federal income tax returns for each of the years in

issue. The returns for 1992, 1993, 1994, and 1995 are dated

January 15, 1998, January 31, 1998, February 7, 1998, and

February 23, 1998, respectively. No requests for extensions of

time to file were requested or granted.

Petitioner's 1992 and 1993 tax returns claim capital loss

carryover deductions emanating from a nonbusiness bad debt

incurred in 1990. The capital loss carryovers claimed in 1992

and 1993 are $3,000 and $788,2 respectively. Petitioner's tax

return for the 1994 year does not claim any capital loss

carryforward. Petitioner's tax returns show tax liabilities in

the following amounts:

 Years 

 1993 1994 1995

 Amount: $15,594 $15,787 $25,113

Petitioner had taxes withheld from his wages for each of the

years in issue. The amounts withheld for the years 1993 through

1995 are as follows:
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3Sec. 6512(b) provides in relevant part:

(1) Jurisdiction to determine.--Except as provided by

paragraph (3) and by section 7463, if the Tax Court finds

that there is no deficiency and further finds that the

taxpayer has made an overpayment of income tax for the same

taxable year * * * in respect of which the Secretary

determined the deficiency, or finds that there is a

deficiency but that the taxpayer has made an overpayment of

such tax, the Tax Court shall have jurisdiction to determine

the amount of such overpayment, and such amount shall, when

the decision of the Tax Court has become final, be credited

or refunded to the taxpayer.

* * * * * * *

(3) Limit on amount of credit or refund.--No such

credit or refund shall be allowed or made of any

portion of the tax unless the Tax Court determines as

part of its decision that such portion was paid--

(A) after the mailing of the notice of deficiency,

(B) within the period which would be applicable

under section 6511(b)(2), (c), 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, or

(C) within the period which would be applicable

under section 6511(b)(2), (c), or (d), in respect of

(continued...)

 Years 

 1993 1994 1995

 Amount 

 withheld: $18,457 $18,875 $24,943 

Respondent issued notices of deficiency for the years 1994

and 1995 on September 17, 1997, and for the year 1993 on October

1, 1997.

OPINION

Our jurisdiction to determine an overpayment and order a

refund is provided in section 6512.3 The Supreme Court has
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3(...continued)

any claim for refund filed within the applicable period

specified in section 6511 and before the date of the

mailing of the notice of deficiency--

(i) which had not been disallowed before that

date,

(ii) which had been disallowed before that

date and in respect of which a timely suit for

refund could have been commenced as of that date,

or

(iii) in respect of which a suit for refund

had been commenced before that date and within the

period specified in section 6532.

recently interpreted this provision. In Commissioner v. Lundy,

516 U.S. 235 (1996), the Court stated:

The analysis dictated by section 6512(b)(3)(B) is

not elegant, but it is straightforward. * * * all that

matters for the proper application of section

6512(b)(3)(B) is that the "claim" contemplated in that

section be treated as the only mechanism for

determining whether a taxpayer can recover a refund. 

Section 6512(b)(3)(B) defines the look-back period that

applies in Tax Court by incorporating the look-back

provisions from section 6511(b)(2), and directs the Tax

Court to determine the applicable period by inquiring

into the timeliness of a hypothetical claim for refund

filed "on the date of the mailing of the notice of

deficiency."

To this end, section 6512(b)(3)(B) directs the Tax

Court's attention to section 6511(b)(2), which in turn

instructs the court to apply either a 3-year or a 2-

year look-back period. See sections 6511(b)(2)(A) and

(B) (incorporating by reference section 6511(a)); * * * 

To decide which of these look-back periods to apply,

the Tax Court must consult the filing provisions of

section 6511(a) and ask whether the claim described by

section 6512(b)(3)(B)--a claim filed "on the date of

the mailing of the notice of deficiency"--would be

filed "within 3 years from the time the return was

filed." See section 6511(b)(2)(A) (incorporating by

reference section 6511(a)). If a claim filed on the

date of the mailing of the notice of deficiency would

be filed within that 3-year period, then the look-back
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period is also three years and the Tax Court has

jurisdiction to award a refund of any taxes paid within

three years prior to the date of the mailing of the

notice of deficiency. Secs. 6511(b)(2)(A) and

6512(b)(3)(B). If the claim would not be filed within

that 3-year period, then the period for awarding a

refund is only two years. Secs. 6511(b)(2)(B) and

6512(b)(3)(B).

In this case, we must determine which of these two

look-back periods to apply when the taxpayer fails to

file a tax return when it is due, and the Commissioner

mails the taxpayer a notice of deficiency before the

taxpayer gets around to filing a late return. * * *

We think the proper application of section

6512(b)(3)(B) * * * requires that a 2-year look-back

period be applied. [Commissioner v. Lundy, supra at 

242-243.]

In 1993, petitioner had tax withheld from his wages in the

total amount of $18,457. This amount is deemed to have been paid

on April 15, 1994. Sec. 6513(a). Respondent has conceded that

petitioner's tax liability is $15,594, the amount shown by

petitioner on his 1993 return. This results in an overpayment of

$2,863. Most of this overpayment ($2,642) is time barred because

the date on which the notice of deficiency was mailed, the

hypothetical claim for refund, is more than 2 years from the date

(April 15, 1994) the tax was deemed paid. Secs. 6511(b)(2)(B),

6512, 6513(a); Commissioner v. Lundy, supra; Galuska v.

Commissioner, 5 F.3d 195 (7th Cir. 1993), affg. 98 T.C. 661

(1992); Allen v. Commissioner, 99 T.C. 475 (1992), affd. without

published opinion 23 F.3d 406 (6th Cir. 1994). The portion of

the claim attributable to a capital loss carryforward is not so

limited. The amount of carryforward claimed in petitioner's 1993
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4The amount of the overpayment attributable to the capital

loss carryforward is the product of the full amount of the loss

carryforward times petitioner's marginal rate; i.e., $788 x .28 =

$221. Respondent agrees that petitioner is entitled to an

overpayment of $221 for 1993.

return was $788. The statute of limitations on a capital loss

carryforward arising from a bad debt deduction is 7 years. Sec.

6511(d)(1). Petitioner was in the 28 percent marginal tax

bracket in 1993. The maximum portion of an overpayment

attributable to the capital loss carryforward ($788) would be

$221.4 Consequently, we hold that petitioner is entitled to a

refund for 1993 in the amount of $221.

For 1994, respondent concedes that petitioner's tax

liability is $15,787 as shown by petitioner on his delinquent

return and that petitioner had tax withheld from his wages in the

total amount of $18,875. This results in an overpayment of

$3,088. None of this amount is claimed to be related to a

capital loss carryforward. For the reasons stated above, the tax

withheld is deemed to have been paid on April 15, 1995, and the

hypothetical claim for refund was made on September 17, 1997. 

The hypothetical claim for refund, having been made more than 2

years from the date the tax was deemed paid, is time barred by

virtue of sections 6511(b)(2)(B) and 6512. Commissioner v.

Lundy, supra; Galuska v. Commissioner, supra; Allen v.

Commissioner, supra.
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For 1995, respondent concedes petitioner's tax liability is

$25,113, the amount shown by petitioner on his return for that

year. The parties agree that the total amount petitioner had

withheld from his wages was $24,943. Petitioner's income tax

deficiency for 1995 is $170.

Respondent determined that petitioner is liable for an

addition to tax under section 6651(a)(1) for failure to file a

timely return for 1995. Generally, individual income tax returns

must be filed on or before the 15th day of April following the

close of the calendar year. Sec. 6072(a). 

Section 6651(a)(1) provides for an addition to tax for

failure to file a timely return. The addition to tax is equal to

5 percent of the amount required to be shown as tax on the

return, with an additional 5 percent for each additional month or

fraction thereof during which such failure continues, not

exceeding 25 percent in the aggregate. 

A taxpayer may avoid the addition to tax by establishing

that the failure to file a timely return was due to reasonable

cause and not willful neglect. Rule 142(a); United States v.

Boyle, 469 U.S. 241, 245-246 (1985). Petitioner presented no

evidence as to the cause for the late filing. In the absence of

a satisfactory explanation for the failure to file a timely

return, we cannot conclude that the failure was due to a

reasonable cause. Consequently, we uphold respondent's
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determination that petitioner is liable for an addition to tax

for the 1995 taxable year pursuant to section 6651(a)(1).

To reflect the foregoing,

Decision will be entered

under Rule 155.