TAX COURT OPINION

Case: Douglas Edward Bruce
Docket Number: 13849-11
Judge: Gustafson
Opinion Type: bench
Filed: 12/14/2012
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 DOUGLAS EDWARD BRUCE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent CLC ) ) ) ) ) Docket No. 13849-11. ) ) ) ) O R D E R Pursuant to the opinion of the Court as set forth in the pages of the transcript of the proceedings before Judge David Gustafson in Denver, Colorado, on November 27, 2012, containing his oral findings of fact and opinion, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Gustafson in Denver, Colorado, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. Decision will be entered in accordance with the oral findings of fact and opinion. (Signed) David Gustafson Judge Dated. Washington, D.C. December 14, 2012 SERVED Dec 14 2012 Capital Reporting Company 3 Bench Opinion by Judge David Gustafson November 27, 2012 Douglas Edward Bruce Docket No. 13849-11 THE COURT: The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This opinion shall not be relied on as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. By a notice of deficiency dated March 10, 2011, the Internal Revenue Service (IRS) determined deficiencies in the Federal income tax of petitioner Douglas Edward Bruce for the years 2006 and 2007, and , additions to tax. Respondent now concedes that there are no deficiencies, and therefore no additions, and that decision should be entered in Mr. Bruce's favor to that extent. However, Mr. Bruce contends that he is entitled to overpayments in 2006 and 2007. The IRS admits that he overpaid his taxes in both years and concedes his entitlement to a refund of $1,160 in 2007, but it disputes his entitlement to any greater refund in 2007 and disputes his entitlement to any refund in 2006, because of the statute of limitations 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 for refunds. For the reasons explained here, we will sustain the IRS's contentions as to the overpayments. Trial of this case was conducted on November 26, 2012, in Denver, Colorado. Mr. Bruce represented himself; and Melinda K. Fisher represented respondent. We find the following facts. 2005 tax year FINDINGS For the year 2005 (a year not before us) Mr. 10 Bruce filed a Federal income tax return (Ex. 3-P) on 11 12 13 14 15 16 a date that our record does not show. On that return he reported an overpayment of $1,555 and requested a refund of that entire amount. That is, he did not elect to have any of it applied to his 2006 estimated tax. He contends that this 2005 overpayment has never been refunded, but that is a 17 matter outside our jurisdiction. 18 19 20 21 22 2006 tax year In the year 2006 Mr . Bruce was employed, and from his wages his employer withheld $1,131 in Federal income tax. After the end of the year, the employer issued to Mr. Bruce (and sent to the 23 Government) a Form W-2 (Ex. 3-P, third page) 24 25 reporting the wages and the income tax withheld for 2006. Mr. Bruce obtained a six-month extension to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 file the return by October 15, 2007 (Ex. 6-P), but he did not file a return for 2006 by that date. 2007 tax year Similarly, in the year 2007 Mr. Bruce was employed, and from his wages his employer withheld $1,160 in Federal income tax. At the end of the year, the employer again issued to Mr. Bruce (and sent to the Government) a Form W-2 (Ex. 3-P, sixth page) reporting the wages and the income tax withheld for 2007. Mr. Bruce obtained a six-month extension to file the return by October 15, 2008 (Ex. 6-P), but he did not file a return for 2007 by that date. The IRS examination The IRS examined Mr. Bruce's Federal income tax liability for a series of years including 2006 and 2007, and it prepared substitutes for return for 2006 in July 2008 and for 2007 in January 2010; and it issued a notice of deficiency in March 2011. 2006 and 2007 returns On June 3, 2011, Mr. Bruce filed returns for both years for the first time; and each return reported a zero tax liability and reported an overpayment of all of his tax paid by withholding. (Ex. 3-P.) On the 2006 return he also reported $1,555 on 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 line 66 as an "amount applied from 2005 return" (even though on his 2005 return he had not elected to apply any overpayment to 2006) and a telephone excise tax credit of $30, for total claimed payments of $2,716. On the 2007 return the only payments Mr. Bruce reported were his payroll withholdings of $1,160. However, in September 2011 (after this suit was filed) he filed an amended return for 2007 reporting on line 65 an "amount applied from 2006 return" (even though on his 2006 return he had not elected to apply any overpayment to 2007). Tax Court petition On June 6, 2011 (about three months after the IRS issued the notice of deficiency, and days after 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Mr. Bruce filed his original returns for 2006 and 16 2007), Mr. Bruce timely mailed his petition to this 17 Court. The petition states that the IRS owes Mr. 18 19 20 21 22 23 24 25 Bruce his "excess withholding", and we construe this as a claim of overpayments. At the time Mr. Bruce filed his petition, he resided in Colorado. 1. Refund jurisdiction OPINION Under section 6512 (b), "if the Tax Court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income tax 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 for the same taxable year, 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". Mr. Bruce invokes that refund jurisdiction. This refund jurisdiction is granted only "for the same taxable year" as the deficiency over which the Court has jurisdiction. Since the IRS's notice of deficiency in this case addressed only 2006 and 2007, we have no deficiency jurisdiction and no refund jurisdiction for any other year. II. Statute of limitations A. The look-pack period of section 6511(b) (2) (A) For 2006 and 2007 Mr. Bruce self-reported a zero income tax liability; and the IRS concedes (Stip. 1) that there is no deficiency in Mr. Bruce's income tax for those years. The taxes that he paid by 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 withholding would therefore constitute overpayments. 21 22 23 24 However, section 6512 (b) (3) (C) provides, "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 25 within the period which would be applicable under 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 sect ion 6511 (b) (2 ) , (c ) , or (d) ". Mr . Bruce' s overpayment claims that the IRS has not conceded are barred by the statute of limitations in section 6511 (b) (2) . Mr. Bruce argues that his claims are timely; and though they are, this fact misses the point that is decisive here. As Mr. Bruce points out, section 6511(a) provides that a refund claim is timely if it is "filed by the taxpayer within 3 years from the time the return was filed". Mr. Bruce's original 2006 and 2007 returns are his claims, since they report overpayments. See 26 C.F.R. sec. 301.6402- 3(a) (1). Consequently, his claims were by definition filed at the same instant as--and therefore "within 3 years from the time"--his returneck were filed, and they were therefore timely. See McGregor v. United States, 225 Ct. Cl. 566, 566 (1980). However, section 6511(b) (2) (A) provides that if the claim for refund is filed within three years of the filing of the return, "the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the return, equal to 3 years plus the period of any extension of time for filing the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 return." Mr. Bruce obtained 6-month extensions of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 time to file his return, so the look-back period for his claims for each of these years would be 3 and a half years before the filing date of June 3, 2011, or December 3, 2007. But in the case of a Tax Court deficiency suit, section 6512 (b) (3) (B) has the effect of treating the issuance of the notice of deficiency (here, on March 10, 2011) as the filing date of the petitioner's claims. The 3-1/2 year look-back period for that earlier date is September 10, 2007. Thus, 10 Mr. Bruce's refunds for each of these years may not 11 12 13 14 15 16 17 18 19 20 21 22 exceed the amounts he paid after September 10, 2007. B. The dates of Mr. Bruce's payments For each of the years at issue, Mr. Bruce seeks the tax that his employer withheld in that year (and in the prior year) . Under section 6513 (b) (1) , "Any tax actually deducted and withheld at the source shall, in respect to the recipient of the income, be deemed to have been paid by him on the 15th day of the fourth month following the close of his taxable year". Thus, his 2006 withholding is deemed to have been paid on April 15, 2007--i.e., before the look- back date of September 10, 2007; and his 2007 23 withholding is deemed to have been paid on April 15, 24 25 2008, i.e., after that date. The 2007 withholding of $1,160 is therefore within the reach of his claim for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 a refund; but refund of the withholding in 2006 (and any prior year) is barred by sections 6511(b) (2) (A) and 6512 (b) (3) (B) . Given the foregoing rules, Mr. Bruce would not be helped if we were to treat prior year's overpayments as if he had elected to apply them to the succeeding year. Section 6511(b) provides that "No credit or refund shall be allowed" if it is time- barred, so a claim for a tax to be credited to the next year's liability cannot be allowed if it is time-barred. It can neither be refunded nor credited. Moreover, Mr. Bruce requested that his overpayments be refunded; he did not elect to have overpayments credited to the succeeding year, pursuant to 26 C.F.R. section 301.6402-3(a) (5). III. Mr. Bruce's arguments Mr. Bruce argues that the denial of his refunds is a penalty or punishment that he does not deserve, since he did not have any tax liability in these years. This argument has no support in the Code or in case law. By their nature, statutes of limitation bar recovery apart from any fault on the part of the claimant. Mr. Bruce states that he delayed filing only because he wanted to be able to file accurate returns 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 rather than estimates, and he argues that the denial of his refunds would be inequitable, since it would deprive him of an admitted overpayment and would unjustly enrich the Government. However, +#¥My he asks for is essentially equitable tolling of the statute of limitations in section 6511(b), but the Supreme Court has held that this statute cannot be so tolled. See United States v. Brockamp, 519 U.S. 347 (1997). Decision will be entered in Mr. Bruce's favor in part to reflect the IRS's concessions of zero deficiencies and additions to tax for 2006 and 2007, and of an overpayment of $1,160 in 2007, but against 14 Mr. Bruce as to his claims for further overpayments. 15 16 17 This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 11:19 a.m., the above-entitled 18 matter was concluded.) 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com