269

PANAGIOTA PAM SOTIROPOULOS, PETITIONER v. 

COMMISSIONER OF INTERNAL REVENUE, 

RESPONDENT

Docket No. 19884–12. Filed May 5, 2014. 

I.R.C. sec. 901(a) permits a U.S. citizen or resident to claim 

a credit against her Federal income tax liability for income 

taxes paid to a foreign country. If such taxes are ‘‘refunded in 

whole or in part,’’ the taxpayer is required to notify the Secretary, who is authorized to redetermine the U.S. tax. I.R.C. 

sec. 905(c)(1). Any tax due as a result of the Secretary’s 

redetermination is due on notice and demand. I.R.C. sec. 

905(c)(3). P is a U.S. citizen who lived and worked in the U.K. 

during 2003–05. On her U.S. returns for these years P 

claimed foreign tax credits in amounts corresponding to the 

U.K. tax withheld by her employer. P subsequently filed U.K. 

income tax returns showing overpayments and applied for 

refunds of U.K. tax. P received payments from U.K. taxing 

authorities but contends that the payments were not 

‘‘refunds’’ within the meaning of I.R.C. sec. 905(c)(1)(C) 

because her entitlement to refunds remains under investigation in the U.K. P did not notify the Secretary of these payments pursuant to I.R.C. sec. 905(c)(1). Following examination 

of P’s returns, R mailed P a notice of deficiency for 2003–05 

determining that the U.K. taxes had been ‘‘refunded’’ and disallowing the claimed foreign tax credits. P petitioned the 

Court. Approximately a year after filing his answer, R moved 

to dismiss the case for lack of jurisdiction. R contends that he 

erred in issuing the notice of deficiency and that I.R.C. sec. 

905(c) authorizes him to redetermine P’s 2003–05 tax and collect it upon notice and demand. Held: This Court has jurisdiction to determine, at a minimum, whether the statutory provision alleged to divest it of jurisdiction applies, that is, 

whether the U.K. taxes paid by petitioner have been 

‘‘refunded in whole or in part’’ within the meaning of I.R.C. 

sec. 905(c)(1)(C). 

Jeffrey L. Gould, for petitioner. 

Scott A. Hovey, for respondent. 

OPINION 

LAUBER, Judge: Currently before this Court is respondent’s 

motion to dismiss for lack of jurisdiction. The Internal Revenue Service (IRS or respondent) issued petitioner a notice of 

deficiency for tax years 2003–05, and petitioner timely petitioned the Court for redetermination of the deficiencies. 

270 142 UNITED STATES TAX COURT REPORTS (269) 

1 All statutory references are to the Internal Revenue Code in effect for 

the tax years in issue, and all Rule references are to the Tax Court Rules 

of Practice and Procedure. All dollar amounts are rounded to the nearest 

dollar. 

Respondent now argues that he erred in issuing the notice 

and that the Court, by virtue of sections 905 and 6213, 1

lacks subject matter jurisdiction over the substantive tax 

issue presented by the petition. 

Background 

Petitioner is a U.S. citizen who lived and worked in 

London, England, during 2003–05 and at the time she petitioned this Court. She was employed by the London office of 

Goldman Sachs during 2003–05. She received employee compensation from Goldman Sachs, which withheld United 

Kingdom (U.K.) income tax from her wages. She filed U.S. 

and U.K. income tax returns for each year at issue. On a 

timely filed U.S. return for each year, she claimed a foreign 

tax credit in a dollar amount equivalent to the U.K. tax withheld by Goldman Sachs. 

On her U.K. tax return for each year, petitioner claimed 

substantial deductions attributable to investments in U.K. 

film partnerships. She claimed these deductions under U.K. 

tax provisions that allowed investors in film partnerships to 

deduct highly leveraged investment costs against their 

earned income. In reliance on these deductions, petitioner 

applied for refunds on her U.K. returns of the tax that her 

employer had withheld and paid over to U.K. taxing authorities. 

Section 905(c)(1) provides that, if a taxpayer has claimed 

a credit for a foreign tax that is later ‘‘refunded in whole or 

in part,’’ the taxpayer ‘‘shall notify the Secretary.’’ The IRS 

is then authorized to redetermine the tax for that year and 

collect, upon notice and demand, any additional tax due. See 

sec. 905(c)(3). 

Petitioner received payments from the U.K. taxing authorities resulting from the submission of her 2003–05 U.K. 

returns. However, she contends that these payments were 

not ‘‘refunds’’ within the meaning of section 905(c)(1)(C) both 

because her entitlement to refunds remains under investigation by U.K. taxing authorities and because the application 

(269) SOTIROPOULOS v. COMMISSIONER 271

of section 905(c) is allegedly affected by provisions of the 

U.S./U.K. income tax treaty. As a result, petitioner did not 

file amended U.S. returns for 2003–05 reporting reduced foreign tax credits, nor did she otherwise notify the IRS pursuant to section 905(c)(1). 

The IRS commenced an examination of petitioner’s 2003– 

05 returns. Before or during the audit, the IRS was informed 

by U.K. taxing authorities that petitioner had invested in 

film partnerships; had claimed substantial deductions attributable thereto; and had filed U.K. returns requesting 

refunds. The IRS determined that petitioner had received 

U.K. income tax refunds of $413,126 in 2003, $292,663 in 

2004, and $239,202 in 2005. It therefore disallowed corresponding amounts of foreign tax credits that petitioner 

claimed on her U.S. returns. 

Rather than invoking section 905(c)(3) as authority for collecting the redetermined tax upon notice and demand, the 

IRS sent petitioner a notice of deficiency for 2003–05. This 

notice showed tax increases flowing from the credit adjustments and determined section 6662(a) accuracy-related penalties. The reductions to petitioner’s foreign tax credits were 

the only adjustments the IRS made to her returns for these 

years. 

Petitioner timely petitioned this Court challenging 

respondent’s determinations. Approximately a year after 

filing his answer, respondent moved to dismiss the case for 

lack of jurisdiction insofar as it concerns the adjustments to 

petitioner’s foreign tax credits. Respondent contends that he 

erred in issuing the notice of deficiency; that section 905(c) 

authorizes him to redetermine petitioner’s 2003–05 tax and 

collect it upon notice and demand; and that foreign tax credit 

adjustments of the sort involved here ‘‘are expressly removed 

from deficiency procedures’’ by a cross-reference from section 

6213(h)(2)(A) to section 905(c). Respondent acknowledges 

that the accuracy-related penalties determined in the notice 

of deficiency ‘‘properly fall under the jurisdiction of this 

Court.’’ However, respondent expresses his intention to concede these penalties if the Court grants his motion to dismiss 

as to the foreign tax credit adjustments. 

272 142 UNITED STATES TAX COURT REPORTS (269) 

Discussion 

This Court always has jurisdiction to determine whether it 

has jurisdiction. Cooper v. Commissioner, 135 T.C. 70, 73 

(2010). The Tax Court is a court of limited jurisdiction, and 

we must ascertain whether the case before us is one that 

Congress has authorized us to consider. See sec. 7442; Estate 

of Young v. Commissioner, 81 T.C. 879, 881 (1983). In determining whether we have jurisdiction over a given matter, 

this Court and the Courts of Appeals have given our jurisdictional provisions a broad, practical construction rather than 

a narrow, technical one. Lewy v. Commissioner, 68 T.C. 779, 

781 (1977). When a statutory provision is capable of two 

interpretations, ‘‘we are inclined to adopt a construction 

which will permit us to retain jurisdiction without doing 

violence to the statutory language.’’ Traxler v. Commissioner, 

61 T.C. 97, 100 (1973). 

I. Statutory Framework 

A. The Tax Court as a Prepayment Forum 

The primary function of this Court is to act as a convenient 

prepayment forum in which taxpayers can challenge IRS 

deficiency determinations without paying the tax first. See 

sec. 6213(a); Lewy v. Commissioner, 68 T.C. at 781; Boris I. 

Bittker & Lawrence Lokken, Federal Taxation of Income, 

Estates, and Gifts, para. 115.2.2, at 115–13 (2d ed. 2012). 

Section 6211 defines a ‘‘deficiency,’’ and section 6212 authorizes the IRS to send a ‘‘notice of deficiency’’ if it determines 

a deficiency with respect to a taxpayer’s tax. Upon receipt of 

a notice of deficiency, the taxpayer may petition this Court 

for redetermination of the deficiency. Sec. 6213(a). The petition must be filed within 90 days if the notice is mailed to 

a U.S. address or within 150 days if, as was true here, ‘‘the 

notice is addressed to a [taxpayer] outside the United 

States.’’ Ibid. 

Section 6213 also places important restrictions on the IRS’ 

ability to assess a deficiency and begin collecting the tax. As 

a rule, the IRS may not assess an income tax deficiency until 

it has mailed a notice of deficiency and the relevant period 

(90 or 150 days, as applicable) has elapsed. Sec. 6213(a). If 

the applicable time window closes and the taxpayer does not 

(269) SOTIROPOULOS v. COMMISSIONER 273

2The provisions of the temporary regulations discussed in the text, secs. 

Continued 

petition this Court, the IRS may proceed with assessment 

and collection. If a taxpayer timely petitions this Court, the 

IRS may not assess the tax or proceed to collect it ‘‘until the 

decision of the Tax Court has become final.’’ Ibid. 

In certain circumstances, the restrictions on assessment 

found in section 6213 do not apply. For example, section 

6201(a)(1) authorizes the IRS to assess (and begin collection 

of ) taxes determined by a taxpayer and shown on his or her 

return. Section 6213(b)(1) authorizes the IRS to assess (and 

begin collection of ) additional tax arising from a mathematical or clerical error apparent on the face of a return. The 

usual restrictions on assessment likewise do not apply to 

assessable penalties, see secs. 6671–6725, or in emergency 

situations, such as termination and jeopardy assessments, 

see secs. 6851, 6852, 6861. 

B. Section 905(c) 

Section 905(c) includes another, quite specialized, exception to the restrictions on assessment set forth in section 

6213. Subject to certain limitations, a U.S. citizen may elect 

to take a foreign tax credit against her U.S. income tax 

liability for income taxes paid or accrued to a foreign country 

or U.S. possession. Sec. 901(a). Congress anticipated the difficulty of ascertaining, at the time the U.S. return is filed, 

the exact amount of foreign tax that will ultimately be allowable as a credit. It accordingly provided, in what is now section 905(c), a special procedure for adjusting the credit when 

the taxpayer’s ultimate liability varies from the amount 

claimed. Section 905(c)(1) specifies three situations in which 

a U.S. taxpayer’s foreign tax credit must be adjusted: 

(A) accrued taxes when paid differ from the amounts claimed as 

credits by the taxpayer, 

(B) accrued taxes are not paid before the date 2 years after the close 

of the taxable year to which such taxes relate, or 

(C) any tax paid is refunded in whole or in part. 

The regulations describe these three situations as 

involving a ‘‘foreign tax redetermination.’’ Sec. 1.905–3T(c), 

Temporary Income Tax Regs., 53 Fed. Reg. 23614 (June 23, 

1988). 2 If a ‘‘foreign tax redetermination’’ as thus defined 

274 142 UNITED STATES TAX COURT REPORTS (269) 

1.905–3T and 1.905–4T, Temporary Income Tax Regs., 53 Fed. Reg. 23613, 

23617 (June 23, 1988), were promulgated in 1988, T.D. 8210, 1988–2 C.B. 

248, and were in effect through November 6, 2007. They were amended by 

T.D. 9362, 2007–48 I.R.B. 1050, in November 2007, but the provisions discussed herein remained substantially the same after that amendment. The 

applicability of these provisions was set to expire on November 5, 2010. 

See secs. 1.905–3T(f ), 1.905–4T(f )(3), Temporary Income Tax Regs., 72 

Fed. Reg. 62784, 62787 (Nov. 7, 2007). The provisions discussed in the text 

were in effect at all times relevant to this case. 

occurs, section 905(c)(1) provides that ‘‘the taxpayer shall 

notify the Secretary, who shall redetermine the amount of 

the tax for the year or years affected.’’ Because the IRS, 

absent notice from the taxpayer, generally will not know of 

revisions to the taxpayer’s foreign tax liabilities, the Internal 

Revenue Code has long required self-reporting of such 

changes. See generally Pac. Metals Corp. v. Commissioner, 1 

T.C. 1028, 1029 (1943) (discussing section 131(c) of the Revenue Act of 1936, a predecessor of section 905(c)). Section 

6689 provides a strong incentive for taxpayers to comply with 

their self-reporting obligations under section 905(c)(1), 

imposing a penalty up to 25% of the deficiency for failure to 

provide the notice required by section 905(c)(1) unless it is 

shown that such failure is due to reasonable cause and not 

due to willful neglect. 

With exceptions not relevant here, the taxpayer is supposed to notify the Secretary by filing an amended return. 

Sec. 1.905–4T(b)(1), Temporary Income Tax Regs., 53 Fed. 

Reg. 23617 (June 23, 1988). An individual taxpayer is 

instructed to include with her amended return a revised 

Form 1116, Foreign Tax Credit, and information sufficient to 

enable the IRS to redetermine her U.S. tax liability. See sec. 

1.905–4T(b)(1), (3), Temporary Income Tax Regs. 

Once the IRS redetermines the taxpayer’s liability in 

accordance with section 905(c)(1), ‘‘[t]he amount of tax (if 

any) due * * * shall be paid by the taxpayer on notice and 

demand by the Secretary, and the amount of tax overpaid (if 

any) shall be credited or refunded to the taxpayer.’’ Sec. 

905(c)(3). A cross-reference from section 6213 confirms that 

the usual restrictions on assessment do not apply to section 

905(c) adjustments made by the IRS. See sec. 6213(h)(2) 

(‘‘For assessments without regard to restrictions imposed by 

this section in the case of—(A) Recovery of foreign income 

(269) SOTIROPOULOS v. COMMISSIONER 275

taxes, see section 905(c).’’); sec. 1.905–4T(b)(1), Temporary 

Income Tax Regs. (‘‘Subchapter B of chapter 63 of the Code 

(relating to deficiency procedures) shall not apply with 

respect to the assessment of the amount due upon such 

redetermination.’’). 

II. Analysis 

The IRS determined deficiencies in petitioner’s income tax 

for 2003–05 based on its contention that she had received 

refunds of U.K. taxes claimed as credits on her U.S. returns 

for those years. The IRS issued her a notice of deficiency and 

she timely petitioned this Court. Respondent contends that 

we nevertheless lack jurisdiction because the increased tax 

determined in the notice of deficiency constitutes a ‘‘section 

905(c) adjustment.’’ 

Respondent contends that petitioner received U.K. tax 

refunds, which triggered his duty to redetermine her U.S. tax 

under section 905(c)(1). This duty arises, respondent contends, regardless whether the Commissioner has received 

notification from the taxpayer and regardless whether the 

taxpayer disputes the predicate for that section’s application. 

Because the IRS has allegedly adjusted petitioner’s foreign 

tax credits under section 905(c)(1), respondent argues that 

the redetermined tax is due on notice and demand under section 905(c)(3) and hence that this Court lacks deficiency 

jurisdiction by virtue of the cross-reference to section 905(c) 

from section 6213(h)(2)(A). The fact that the IRS sent petitioner a notice of deficiency is irrelevant, according to 

respondent, since the mailing and receipt of a notice do not 

automatically confer jurisdiction. 

As a preliminary matter, we agree with respondent that 

the Internal Revenue Code, not merely the issuance of a 

notice of deficiency, confers jurisdiction on this Court. See 

Thompson v. Commissioner, 137 T.C. 220, 225–226 (2011), 

rev’d on other grounds, 729 F.3d 869 (8th Cir. 2013). While 

the Thompson decision was reversed and remanded on other 

grounds, the Court of Appeals did not disturb this portion of 

the holding, and we see no reason to do so now. However, we 

do not agree with the other steps of respondent’s argument. 

In urging that we lack jurisdiction, respondent cites no 

caselaw but rather relies on what he regards as the plain 

276 142 UNITED STATES TAX COURT REPORTS (269) 

3We make no findings at this stage of the case concerning the merits 

of petitioner’s arguments. The only issue before us is the legal question 

whether we have subject matter jurisdiction to adjudicate her claims. See 

Tigers Eye Trading, LLC v. Commissioner, 138 T.C. 67, 75 (2012) (citing 

Taylor v. Voss, 271 U.S. 176, 186 (1926)). 

language of the statute. The problem with respondent’s position is that a plain reading of section 905(c) describes a circumstance that did not necessarily occur here. Section 

905(c)(3) empowers the Commissioner to collect on notice and 

demand only in the case of a ‘‘redetermination under paragraph (1).’’ Paragraph 1 is structured as a conditional statement. As relevant here, it provides that if a foreign tax paid 

is refunded, then the taxpayer is required to notify the Secretary, who shall then redetermine the tax. Here, petitioner 

disputes that she received a ‘‘refund’’ of U.K. tax. She contends that the payments she received from U.K. taxing 

authorities were not ‘‘refunds’’ within the meaning of section 

905(c)(1)(C), both because her entitlement to refunds remains 

under investigation in the U.K. and because the application 

of section 905(c) is allegedly affected by provisions of the 

U.S./U.K. income tax treaty. 3 And because she allegedly 

received no ‘‘refunds,’’ she did not notify—and she contends 

that she had no obligation to notify—the Secretary under 

section 905(c)(1). 

In short, this is not a case where the taxpayer has conceded receipt of a foreign tax refund by notifying the Secretary, filing an amended return, and self-reporting an 

increased tax liability. Section 905(c)(1)(C) applies only ‘‘[i]f 

* * * any tax paid is refunded in whole or in part,’’ and petitioner contends that this condition has not been satisfied. We 

necessarily have jurisdiction to determine whether section 

905(c)(1)(C)—the statutory provision alleged to divest us of 

jurisdiction—applies. 

The Court confronted analogous facts in Comprehensive 

Designers Int’l, Ltd. v. Commissioner, 66 T.C. 348 (1976). The 

taxpayer there claimed on its U.S. return a foreign tax credit 

for an accrued U.K. tax. The taxpayer determined this credit 

by translating its accrued liability in British pounds into dollars at the exchange rate prevailing at the end of its fiscal 

year, namely, £1.00 = $2.80. The taxpayer’s U.K. tax liability, 

when subsequently paid, was the same as its accrued 

liability in terms of British pounds. In dollar terms, however, 

(269) SOTIROPOULOS v. COMMISSIONER 277

4Section 905(c) of the 1954 Code, which was similar in substance to the 

current statute, provided: ‘‘If accrued taxes when paid differ from the 

amounts claimed as credits by the taxpayer, or if any tax paid is refunded 

in whole or in part, the taxpayer shall notify the Secretary [or his delegate], who shall redetermine the amount of the tax for the year or years 

affected.’’ The original version of the statute, enacted in 1918, read similarly: ‘‘If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the 

taxpayer shall notify the Commissioner who shall redetermine the amount 

of the tax due * * * and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand.’’ Revenue Act of 1918, Pub. L. No. 65–254, sec. 222(b), 40 Stat. at 1073. 

its U.K. tax liability when paid was significantly lower than 

when accrued, because the pound had depreciated and was 

then convertible into dollars at a rate of £1.00 = $2.40. Id. 

at 350. 

On audit, the taxpayer contended that no adjustment to its 

foreign tax credit was required because its U.K. tax liability, 

in British pounds, was the same when paid as when accrued. 

The IRS disagreed, contending that, because of the exchange 

rate differential, the ‘‘accrued taxes when paid differ[ed] from 

the amounts claimed as credits by the taxpayer’’ within the 

meaning of section 905(c) of the 1954 Code. 4 The IRS sent 

the taxpayer a notice of deficiency based on a redetermination of its foreign tax credit, and the taxpayer timely sought 

review in this Court. 

The Court in Comprehensive Designers did not address the 

jurisdictional issue currently before us, evidently because the 

parties had not raised it. Rather, the Court proceeded to the 

merits and ruled in favor of the IRS. See 66 T.C. at 354–356. 

As Judge Tannenwald framed the question, ‘‘We must decide 

whether the amount of [petitioner’s foreign tax] credit should 

be adjusted pursuant to section 905(c).’’ Id. at 354. 

Like the taxpayer in Comprehensive Designers, petitioner 

disputes that a foreign tax redetermination has occurred. 

Just as the taxpayer in Comprehensive Designers disagreed 

that its ‘‘accrued taxes when paid differ[ed] from the 

amounts claimed as credits,’’ petitioner disagrees that her 

U.K. tax ‘‘has been refunded in whole or in part.’’ In each 

case, the taxpayer did not file an amended return or otherwise notify the Secretary pursuant to section 905(c)(1); the 

IRS determined a deficiency stemming from partial disallowance of the foreign tax credit; the IRS sent the taxpayer a 

278 142 UNITED STATES TAX COURT REPORTS (269) 

5See Steel Improvement & Forge Co. v. Commissioner, 36 T.C. 265, 280– 

282 (1961) (discussing sec. 131(c) of 1939 Code), rev’d on another issue, 314 

F.2d 96 (6th Cir. 1963); H.H. Robertson Co. v. Commissioner, 8 T.C. 1333, 

1340 (1947) (rejecting contention that amounts received from U.K. taxing 

authorities ‘‘were not ‘refunded’ within the meaning of that word as used 

in’’ sec. 131(c) of the 1939 Code), aff ’d, 176 F.2d 704 (3d Cir. 1949); Pac. 

Metals Corp. v. Commissioner, 1 T.C. 1028, 1030 (1943) (determining foreign tax credit adjustment when IRS issued notice of deficiency after taxpayer ‘‘failed to comply with the mandate of section 131(c) by failing to notify the Commissioner in 1939 that it had received a refund of part of the 

1936 foreign tax’’). 6 Even in the case of mathematical errors, Congress has determined to 

afford taxpayers a prepayment forum by providing that ‘‘the deficiency procedures prescribed by this subchapter’’ shall apply if the IRS reassesses 

the tax after the taxpayer timely requests that the assessment be abated. 

See sec. 6213(b)(2)(A). The ability to cure before assessment of some assessable penalties is additional evidence of a system intended to provide 

taxpayers meaningful opportunities to remedy the problem before assessment. See, e.g., sec. 6702 (frivolous return penalty does not apply if taxpayer withdraws frivolous submission within 30 days of receiving notice 

from the IRS). 

notice of deficiency; and the taxpayer timely sought redetermination of that deficiency in our Court. In Comprehensive 

Designers and on other occasions, we decided the merits of 

questions concerning foreign tax credit adjustments described 

in section 905(c) and its predecessors, in each case without 

addressing the jurisdictional issue that respondent raises 

now. 5

The statutory scheme that Congress has created generally 

affords taxpayers a prepayment forum to contest disputed 

taxes. The Code provides limited exceptions to this rule, 

allowing the Commissioner to assess the tax summarily (for 

example) where the taxpayer has reported a tax on her 

return or made obvious mathematical errors in computing 

her tax. See secs. 6201(a)(1), 6213(b). The common thread in 

these non-emergency situations is that the assessment is 

uncontroverted and does not need independent review, since 

the taxpayer does not dispute that the tax is owing. This 

statutory scheme supports the outcome in Comprehensive 

Designers and the other precedents we have cited, which 

afforded taxpayers a prepayment forum for contesting the 

application of section 905(c)(1), and its predecessors. 6

At this point, we need not decide whether we have subject 

matter jurisdiction over all aspects of this controversy. At the 

(269) SOTIROPOULOS v. COMMISSIONER 279

very least, we have jurisdiction to determine our jurisdiction. 

We thus have jurisdiction to decide whether the statutory 

provision alleged to divest us of jurisdiction applies, i.e., 

whether the U.K. taxes paid by petitioner have been 

‘‘refunded in whole or in part’’ within the meaning of section 

905(c)(1)(C). This will afford petitioner a prepayment forum 

for resolving the central issue that she raises on the merits, 

namely, that the amounts she received from U.K. taxing 

authorities during 2003–05 were not ‘‘refunds.’’ 

To reflect the foregoing, 

An order will be issued denying respondent’s motion to dismiss for lack of jurisdiction. 

f