United States Tax Court

T.C. Memo. 2023-54

ESTATE OF ANTHONY R. TANNER, DECEASED,

MARGLEN M. TANNER, PERSONAL REPRESENTATIVE,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 6521-16. Filed May 1, 2023.

—————

Joseph M. Erwin, for petitioner. 

Ladd Christman Brown, Lauren B. Epstein, Alexander N. Martini, and 

Jamie A. Schindler, for respondent.

MEMORANDUM OPINION

BUCH, Judge: Anthony R. Tanner was a U.S. citizen who filed 

income tax returns with the Virgin Islands Bureau of Internal Revenue 

(VIBIR), but not the U.S. Internal Revenue Service, for 2003 and 2004 

(years in issue). On those returns, he claimed to be a bona fide resident 

of the U.S. Virgin Islands (USVI). Because he claimed USVI residency 

but had paid U.S. taxes, the VIBIR requested that those taxes be 

“covered over” to the USVI Treasury through “cover-over requests” sent

to the Internal Revenue Service (IRS) in 2005 and 2006. A cover-over 

request typically includes a partial or complete copy of a taxpayer’s 

USVI return. Nearly a decade later, the Commissioner sent Mr. Tanner 

a notice of deficiency for the years in issue. In the notice, the 

Commissioner determined that Mr. Tanner was not a bona fide USVI 

resident and that he was required to file U.S. income tax returns. The 

Commissioner determined U.S. income tax deficiencies and penalties.

Served 05/01/23
2

[*2] The Commissioner must assess tax within three years after a 

return is properly filed by the taxpayer. I.R.C. § 6501(a).1 For a return 

to be “properly filed by the taxpayer,” the taxpayer must have intended 

the document to be filed as his return. Mr. Tanner’s estate (Estate) 

makes three arguments for why the Commissioner’s notice of deficiency 

should be barred by the statute of limitations regardless of whether Mr. 

Tanner was a bona fide USVI resident.

The Estate contends that the three-year period for assessment 

under section 6501(a) commenced when the VIBIR transmitted coverover requests to the IRS. However, whether Mr. Tanner intended that 

those documents be filed as his returns is an outstanding issue of 

material fact.

The Estate argues that the three-year period for assessment 

commenced when Mr. Tanner filed USVI returns with the VIBIR. But 

the U.S. Court of Appeals for the Eleventh Circuit, the court to which 

this case is appealable, has held that the filing of a USVI return does 

not begin the running of the period of limitations for U.S. income tax 

purposes unless the taxpayer is a bona fide USVI resident. 

Commissioner v. Estate of Sanders, 834 F.3d 1269 (11th Cir. 2016), 

vacating and remanding 144 T.C. 63 (2015).

The Estate’s remaining argument is that we should apply

Treasury Regulation § 1.932-1(c)(2)(ii). But by its own terms, the 

regulation does not apply for the years in issue. The Estate asks us to 

invalidate the effective date so that it would apply to the years in issue.

But we have previously held that this regulation’s effective date is valid. 

Tice v. Commissioner, No. 24983-15, 160 T.C., slip op. at 6, 11–13 (Apr.

10, 2023).

Because issues of fact remain as to the Estate’s principal 

argument, we must deny summary judgment.

Background

Mr. Tanner filed USVI income tax returns for 2003 and 2004 with 

the VIBIR on December 29, 2004, and October 17, 2005, respectively. 

1 Unless otherwise indicated, all statutory references are to the Internal 

Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, all regulation 

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all 

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

Procedure. All monetary amounts are rounded to the nearest dollar.
3

[*3] The VIBIR directs individual taxpayers to use the same forms that 

the IRS uses in administering the income tax laws under the Internal 

Revenue Code. Mr. Tanner followed the VIBIR’s directions by using 

Form 1040, U.S. Individual Income Tax Return. On his returns, he 

claimed to be a bona fide USVI resident. 

The VIBIR made “cover-over” requests to the IRS. A cover-over 

request is typically made when a bona fide USVI resident pays U.S. 

taxes but files a USVI return. See I.R.C. § 7654. Through the cover-over 

request, the VIBIR requests that taxes paid to the United States be 

remitted to the USVI. The request will typically include some or all of 

the taxpayer’s USVI return. The IRS received cover-over requests from 

the VIBIR relating to Mr. Tanner’s 2003 and 2004 returns on April 11, 

2005, and September 4, 2006, respectively. The 2003 request included 

the first two pages of Mr. Tanner’s 2003 return, a Schedule C, Profit or 

Loss From Business, and a Form W–2, Wage and Tax Statement. The 

parties cannot find the 2004 request.

On December 9, 2015, the Commissioner mailed Mr. Tanner a 

notice of deficiency for 2003 and 2004. In that notice, the Commissioner 

determined that Mr. Tanner was not a bona fide USVI resident and that 

all of his income was from U.S. sources. The Commissioner further 

determined that Mr. Tanner was required, but failed, to file U.S. federal 

income tax returns for 2003 and 2004. The Commissioner determined 

deficiencies for 2003 and 2004 totaling $3,230,967 and additions to tax 

totaling $1,624,168. 

While residing in Florida, Mr. Tanner timely filed a Petition 

disputing the notice of deficiency in its entirety. He alleged the 

Commissioner erred in determining that he was not a bona fide USVI 

resident, that his income was from U.S. sources, and that he was 

required to file U.S. income tax returns. Mr. Tanner also argued that 

the Commissioner is barred from assessing the deficiencies because the 

period of limitations expired before the Commissioner issued the notice 

of deficiency. While this case has been pending, Mr. Tanner passed 

away.2

2 On March 27, 2017, Marglen M. Tanner was appointed personal 

representative of the Estate. On April 19, 2017, we granted a Motion to Substitute 

Parties pursuant to Rule 63. The Estate was substituted for Mr. Tanner as the 

petitioner in this case, and the caption was amended accordingly. 
4

[*4] Discussion

Pending before us is the Estate’s Motion for Summary Judgment 

in which the Estate asks us to find that the three-year period of 

limitations to assess deficiencies for the years in issue has lapsed. The 

Commissioner opposes the Estate’s Motion. He argues that the Motion 

should be denied because material facts remain in dispute. Whether the 

three-year period applies hinges upon whether a return has been filed 

by the taxpayer. Without the filing of a return, the period never begins 

to run. I.R.C. § 6501(c)(3). Thus, we must decide whether Mr. Tanner 

filed a U.S. return, and if so, when.

I. Summary Judgment Standard

The purpose of summary judgment is to expedite litigation and 

avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. 

v. Commissioner, 90 T.C. 678, 681 (1988). The Court may grant 

summary judgment when there is no genuine dispute as to any material 

fact and a decision may be rendered as a matter of law. Rule 121(a)(2); 

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 

F.3d 965 (7th Cir. 1994). In deciding whether to grant summary 

judgment here, we construe factual materials and make factual 

inferences in the light most favorable to the Commissioner, the 

nonmoving party. See Sundstrand Corp., 98 T.C. at 520.

II. Governing Statutes

A. U.S. Statute of Limitations

Section 6501(a) generally requires the Commissioner to assess 

tax within three years after a return is filed, subject to various 

exceptions. “Return” is defined as “the return required to be filed by the 

taxpayer.” I.R.C. § 6501(a). Thus, to determine whether the three-year 

period has been triggered, we consider (1) whether a document 

submitted was the “return” required to be filed, and if so, (2) whether it 

was properly “filed by the taxpayer.” Appleton v. Commissioner, 140 T.C. 

273, 284 (2013). In the absence of a return, “tax may be assessed, or a 

proceeding in court for the collection of such tax may be begun without 

assessment, at any time.” I.R.C. § 6501(c)(3). In this case, the parties 

disagree about whether the general three-year period or the exception 

for nonfilers applies.
5 

B. USVI Income Taxation—Section 932

1. Background

The USVI is a U.S. territory, but it has a separate tax system that

“mirrors” the U.S. system. 48 U.S.C. § 1541(a); Appleton, 140 T.C. 

at 278. The USVI uses a “mirror code” that is identical to the Internal 

Revenue Code, except the mirror code replaces “United States” with 

“Virgin Islands.” Appleton, 140 T.C. at 278. The VIBIR administers the 

mirror code. See Coffey v. Commissioner, 663 F.3d 947, 949 (8th Cir. 

2011). Since Congress established the mirror code in 1921, filing 

requirements for U.S. citizens residing in the USVI have changed. See 

Appleton, 140 T.C. at 278–79. Originally, U.S. citizens residing in the 

USVI who had income from both sources “were required to file returns 

and pay taxes to both jurisdictions.” Id. at 278. In 1954, Congress 

enacted a rule allowing permanent USVI residents to meet their U.S. 

tax obligations by paying income tax to the USVI alone. See id. at 279. 

The rule also provided that U.S. taxes paid by USVI residents would be 

covered over (i.e., paid to) the USVI Treasury. Id.

In 1986, Congress replaced the existing rule with section 932, 

which applies for the years in issue here. Appleton, 140 T.C. at 279. 

Under section 932, a U.S. citizen who is a “bona fide” USVI resident and 

meets certain requirements owes income tax to the USVI, not the United 

States. See I.R.C. §§ 932(b), (c)(4), 7654; Appleton, 140 T.C. at 281; 

Cooper v. Commissioner, T.C. Memo. 2015-72, at *15. If such an 

individual happens to pay U.S. income tax, section 7654(a) provides a 

coordination rule such that the U.S. taxes “shall be covered into the 

Treasury” of the USVI. See Hulett v. Commissioner, 150 T.C. 60, 65–66 

(2018), rev’d and remanded sub nom. Coffey v. Commissioner, 987 F.3d 

808 (8th Cir. 2021); Appleton, 140 T.C. at 279; see also 48 U.S.C. § 1642 

(providing that taxes shall be covered into the USVI and “shall be

available for expenditure as the [USVI] Legislature . . . may provide”). 

To get these taxes to the USVI, the VIBIR sends the IRS a cover-over 

request that typically includes copies of the taxpayer’s USVI return (or 

parts thereof). See Hulett, 150 T.C. at 65–66. Mr. Tanner took the 

position that he was a bona fide USVI resident on his USVI returns. He 

did not file U.S. returns, and the VIBIR requested the U.S. taxes he had 

paid to be covered over into the USVI.

[*5]
6 

2. Filing Requirements 

Section 932 sets out different filing requirements for taxpayers 

(including U.S. citizens such as Mr. Tanner) according to whether they: 

(1) reside in the USVI or (2) do not reside in the USVI but receive USVIsource income. See I.R.C. § 932(a), (c). A U.S. citizen who is a bona fide 

USVI resident must file a return with the USVI. I.R.C. § 932(c)(1)

and (2). But if that person is not a bona fide USVI resident and has 

USVI-source income, he or she must file a return with the United States 

and the USVI. I.R.C. § 932(a)(1) and (2). For purposes of the pending 

Motion, the Estate does not assert that Mr. Tanner was a bona fide USVI 

resident, and we must presume for purposes of deciding the Motion that 

he was not.3 Because we presume that Mr. Tanner was not a bona fide 

USVI resident, we also presume he was required to file U.S. returns for 

2003 and 2004.

When Mr. Tanner filed his returns, the law was unsettled as to 

how the different filing requirements in section 932 would operate in 

conjunction with section 6501(a). See Hulett, 150 T.C. at 75–76. This 

uncertainty results in the question presented here: If a U.S. citizen 

claims bona fide USVI residency on USVI returns filed with the VIBIR, 

will those returns trigger the three-year period for assessing U.S. tax 

even if that person was not a bona fide USVI resident? 

The IRS issued interim guidance addressing this question in 

2007, after Mr. Tanner filed his USVI returns and after the IRS received 

the cover-over requests for the years in issue. I.R.S. Notice 2007-19, §§ 2 

and 3, 2007-1 C.B. 689, 689–90, provided that an individual who took 

the position on a USVI return that he was a bona fide USVI resident 

and had gross income greater than $75,000 could trigger section 6501(a) 

only by also filing a U.S. Form 1040 reporting no gross income (a zero 

return) with the IRS. Taxpayers with at least $75,000 of income could 

elect to apply the notice retroactively to tax years ending before 

3 Section 932 was amended during the years in issue. See American Jobs 

Creation Act of 2004, Pub. L. No. 108-357, § 908(c)(2), 118 Stat. 1418, 1656. Effective 

until October 22, 2004, bona fide residency was determined on the basis of residency 

on the last day of the taxable year. See I.R.C. § 932(a) and (c) (before amendment).

Effective for tax years ending after October 22, 2004, the determination is based on 

the entire taxable year, not just the last day. See I.R.C. § 932(a), (c) (after amendment).

The distinction is irrelevant for purposes of the pending Motion because we must 

presume Mr. Tanner was not a bona fide USVI resident.

[*6]
7

[*7] December 31, 2006, by filing a zero return for a past taxable year. 

Id. § 3, 2007-1 C.B. at 689–90.

On April 9, 2008, the Secretary promulgated final regulations. 

See Treas. Reg. § 1.932-1; T.D. 9391, 2008-1 C.B. 945. Treasury 

Regulation § 1.932-1(c)(2)(ii) provides:

For purposes of . . . section 6501(a), an income tax return 

filed with the Virgin Islands by an individual who takes the 

position that he or she is a bona fide resident of the Virgin 

Islands . . . will be deemed to be a U.S. income tax return, 

provided that the United States and the Virgin Islands 

have entered into an agreement for the routine exchange 

of income tax information satisfying the requirements of 

the Commissioner. The working arrangement announced 

in Notice 2007-31 satisfies the condition of the preceding 

sentence. See Notice 2007-31 (2007-16 IRB 971) (applicable 

to taxable years ending on or after December 31, 2006, 

unless and until arrangement terminates). In the absence 

of such an agreement, individuals to whom this paragraph 

(c) applies generally must file an income tax return for the 

taxable year with the United States to begin the period of 

limitations for Federal income tax purposes as provided in 

section 6501(a) . . . .

(Emphasis added.) This regulation applies prospectively for tax years 

ending after April 9, 2008, and could be applied retroactively to tax years

ending on or after December 31, 2006. Treas. Reg. § 1.932-1(j). The 

regulation provides that the interim rules of Notice 2007-19 would still 

be applied to tax years ending before December 31, 2006. Treas. Reg. 

§ 1.932-1(c)(2)(ii). Thus, this regulation was not applicable for the years 

in issue, and under Notice 2007-19, Mr. Tanner could have triggered 

section 6501(a) only by filing zero returns with the IRS.

III. The Estate’s Arguments

The Estate argues that the notice of deficiency is time barred 

under section 6501(a) because the Commissioner did not issue the notice 

within three years after Mr. Tanner filed returns for 2003 and 2004. The 

Estate offers three alternative grounds for this argument. First, the 

Estate contends that section 6501(a) was triggered when the IRS 

received cover-over requests from the VIBIR. See Hulett, 150 T.C. 

at 96–97. Second, the Estate contends that section 6501(a) was triggered 
8

[*8] when Mr. Tanner filed his returns with the VIBIR. See id. at 98–104 

(Thornton, J., concurring in result only). Finally, the Estate contends 

that Mr. Tanner’s USVI returns should be deemed U.S. returns 

pursuant to Treasury Regulation § 1.932-1(c)(2)(ii) because that 

regulation is invalid to the extent that is does not apply for the years in 

issue. To address the first two grounds, we must revisit Hulett, a Courtreviewed opinion in which we issued lead, concurring, and dissenting 

opinions, but none garnered a majority vote. See Hulett, 150 T.C. at 97, 

104, 107.

A. Were the Cover-Over Requests Returns Properly Filed by the 

Taxpayer?

Citing the lead opinion in Hulett, the Estate argues that the 

VIBIR’s transmission of cover-over requests to the IRS in 2005 and 2006 

triggered the three-year period for assessment. The opinion of the Court

concluded that partial copies of USVI returns (first two pages and Forms 

W–2) that the IRS received in the cover-over requests were federal 

income tax returns for purposes of section 6501(a) after applying the test 

laid out in Beard v. Commissioner, 82 T.C. 766 (1984), aff’d, 793 F.2d 

139 (6th Cir. 1986). Hulett, 150 T.C. at 81, 96–97. To be a “return” under 

Beard, 82 T.C. at 777, a document must (1) contain “sufficient data to 

calculate tax liability,” (2) “purport to be a return,” (3) “be an honest and 

reasonable attempt to satisfy the requirements of the tax law,” and 

(4) be executed “under penalties of perjury.” The opinion of the Court

concluded that the cover-over requests were “returns” because they 

satisfied this test. As for the section 6501(a) requirement that those 

returns were “filed by the taxpayer,” the opinion relied on a deemed 

concession by the IRS that those returns had been filed. Hulett, 150 T.C. 

at 80. The opinion of the Court thus held that the cover-over requests 

triggered section 6501(a). Hulett, 150 T.C. at 80.

Genuine disputes of material fact preclude us from applying the 

opinion of the Court’s holding here. Unlike Hulett, the Commissioner 

does not concede in this case that the cover-over requests were returns 

filed by Mr. Tanner. Although third parties may file on a taxpayer’s 

behalf in certain circumstances, see Treas. Reg. § 1.6012-1(a)(5), the 

taxpayer must intend that the return be filed, see, e.g., Florsheim Bros. 

Drygoods Co. v. United States, 280 U.S. 453, 462 (1930); Espinoza v. 

Commissioner, 78 T.C. 412, 422 (1982); Dingman v. Commissioner, T.C. 

Memo. 2011-116, 101 T.C.M. (CCH) 1562, 1569; Allnutt v. 

Commissioner, T.C. Memo. 2002-311, 84 T.C.M. (CCH) 669, 673, aff’d, 

523 F.3d 406 (4th Cir. 2008). Intent is a factual issue that depends on 
9

[*9] the circumstances of each case. See Rutter v. Commissioner, T.C. 

Memo. 2017-174, at *25. The Commissioner has not conceded, and the 

Estate has not established, that Mr. Tanner intended the VIBIR’s 

transmission of the cover-over requests be the filing of his returns. Thus, 

we cannot grant summary judgment on this ground. Moreover, the 

record in this case includes only a copy of the 2003 cover-over request. 

Without the 2004 cover-over request, we cannot determine whether its 

contents satisfy Beard.

B. Were the USVI Returns Filed with the VIBIR Returns 

Properly Filed by the Taxpayer?

Citing the concurring opinion in Hulett, the Estate argues that 

Mr. Tanner’s filing of returns with the VIBIR in 2004 and 2005 triggered 

the three-year period for assessment. The concurring opinion concluded 

that returns filed with the VIBIR were federal income tax returns under 

Beard regardless of whether the taxpayers were bona fide USVI 

residents. Hulett, 150 T.C. at 98 (Thornton, J., concurring in result only).

The Eleventh Circuit, to which an appeal of this case would lie, 

takes a different approach. See Commissioner v. Estate of Sanders, 834 

F.3d 1269. In Estate of Sanders, the Eleventh Circuit held that “a 

taxpayer who files a return only with the VIBIR does not trigger the 

statute of limitations unless he actually is a bona fide resident of the 

USVI.” Commissioner v. Estate of Sanders, 834 F.3d at 1278–79. The 

Eleventh Circuit believed this holding was “clearly indicated by the 

plain language of the statute” and noted that section 932(a) “expressly 

requires” a U.S. citizen who is not a bona fide USVI resident to file both 

U.S. and USVI returns. Commissioner v. Estate of Sanders, 834 F.3d at 

1276, 1279. The Eleventh Circuit did not create an exception based on a 

taxpayer’s subjective, good faith belief that he was a bona fide USVI 

resident. Id. at 1279.

We must follow the precedent of the Court of Appeals to which an 

appeal of a case would lie if it is squarely on point. See Golsen v. 

Commissioner, 54 T.C. 742, 756–57 (1970), aff’d, 445 F.2d 985 (10th Cir. 

1971). Because the Eleventh Circuit has squarely held that Mr. Tanner 

had to be a bona fide USVI resident for his USVI returns to trigger 

section 6501(a), and we must presume for purposes of deciding this 

Motion that he was not one, we cannot grant summary judgment on this 

ground.
10

C. Should Treasury Regulation § 1.932-1(c)(2)(ii) Apply?

Finally, the Estate argues that Treasury Regulation § 1.932-

1(c)(2)(ii) is invalid to the extent that it does not apply for the years in 

issue. Treasury Regulation § 1.932-1(c)(2)(ii) provides that a return filed 

with the USVI “by an individual who takes the position that he . . . is a 

bona fide [USVI] resident” is “deemed to be a U.S. income tax return” 

for purposes of section 6501(a). The regulation applies prospectively to 

tax years ending after April 9, 2008, and could be applied retroactively 

to tax years ending on or after December 31, 2006. Treas. Reg. § 1.932-

1(c)(2)(ii), (j). The Estate argues that Treasury acted arbitrarily and 

capriciously, and in violation of the Fifth Amendment Due Process 

Clause, by not extending the benefit of this regulation to taxpayers for 

tax years ending before December 31, 2006. We recently addressed 

similar arguments in Tice, 160 T.C., slip op. at 11–13. 

In Tice, we concluded that the regulation was valid because 

Treasury “articulated a satisfactory explanation for its action . . . in the 

preamble to the final rule.” Id. at 12. The preamble explained that the 

“rule applies as long as the IRS and [the USVI] have in place an 

agreement for the automatic exchange of information.” Id. (quoting T.D. 

9391, Preamble, 2008-1 C.B. at 951). Because a 2007 arrangement 

satisfied this condition, the “rule applie[d] to years ending on or after 

December 31, 2006.” Id. We further explained that were we to invalidate 

the regulation, the “consequence would be to ‘hold [it] unlawful and set 

it aside,’ 5 U.S.C. 706(2), not make it applicable for the years in issue.” 

Id. We also rejected the argument that Treasury Regulation § 1.932-1 

violates due process because it fails to give fair warning of the conduct 

it requires. We rejected this argument because “the conduct required is 

found in the statute—i.e., section 932(a)(2)—not the regulations. See 

Hulett, 150 T.C. at 95 (‘[T]he absence of regulations doesn’t repeal 

section 932.’).” Tice, 160 T.C., slip op. at 12. 

 The Estate “understandably wants the rule in Treasury 

Regulation § 1.932-1(c)(2)(ii) to apply for the years in issue. But it did 

not.” See id. Accordingly, we cannot grant the Motion for Summary 

Judgment on this ground.

IV. Conclusion 

We may grant summary judgment only if material facts are not 

in dispute and a decision can be rendered as a matter of law. Because 

[*10]
11

[*11] material facts remain in dispute, we must deny the Estate’s 

Motion for Summary Judgment.

An appropriate order will be issued.