Source: https://taishofflaw.com/2011/12/
Timestamp: 2019-04-19 12:55:16+00:00

Document:
It’s been quite a year; 125 posts and still enthusiastic. Best wishes to all.
A certain Director at a major accounting firm directed my attention to the new Treasury Regulations concerning Cost Sharing Arrangements and Platform Contribution Transfers among controlled entities.
She suggested that small businesses, for whose tax advisers I am writing, might encounter such dealings, principally in-bound US corporations and LLCs controlled by foreign entities. Quoting from the introduction to these regulations, “(A) unifying underpinning of the section 482 regulations is that controlled transactions reflecting similar economics, regardless of the type of transaction (such as transfer of intangibles or provision of services), should be valued in accordance with similar principles and methods.” Simple enough.
And as today is a Federal holiday, wherefore school is out at Tax Court, I thought I’d fish for interesting morsels in TD 9568, a/k/a 80082 Federal Register / Vol. 76, No. 246 / Thursday, December 22, 2011 / Rules and Regulations, wherein the new Regulations appear.
But as I read the first fifty or so of the 202 pages of TD 9568, it became clear that it would be a rare small US firm that encountered the deals to which the Regulations were directed.
Again quoting TD 9568, “(I)t has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collections of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that this rule applies to U.S. businesses and foreign affiliates that enter into cost sharing arrangements.
Quite possibly the CCASBA’s eyes glazed over at the same point as mine did.
So I’ll take Treasury at its word, and presume my readers will rest content with my abstract of the Regulations, as follows. The calculations of cost and profit must be reasonable, and must be based upon arms’-length or equivalent transactions. You can’t have the right to reject future contingent payments. You can’t mix-and-match discount rates to get the results you want. Play nice, kids.
With apologies to John Frederick Coots and Haven Gillespie, the authors of the 1934 classic “Santa Claus is Coming to Town”, I note that, before going off to celebrate, Tax Court plays surrogate Santa Claus, handing out coal to bad boys and girls. On Thursday last, Tax Court gave out five lumps. I’ll summarize them quickly, as (a) they have little instructional or entertainment value, and (b) I am instructed by a certain Director at a major accounting firm to discuss the IRS’ new Cost Sharing Agreement regs. The latter will get separate treatment.
First, Syed A. and Rafiunnisa R. Ahmed, 2011 T.C. Mem. 295, filed 12/22/11. Sy wins religious discrimination suit, footnotes the recovery on his return (because he got a 1099-MISC), but doesn’t pay tax. Although the general release he signs says he is surrendering any claims for “personal injuries”, Judge Wells says personal injuries are greater than physical injuries (my emphasis), and that’s what Section 104(a)(2) requires. Sy had a heart attack, he claims, and was made to work where he got nauseated from malodorous chemicals, but neither the complaint nor the settlement agreement itemized physical illness or injury, and the general release was the usual boilerplate. IRS wins.
Second, Illya Bell, 2011 T.C. Mem. 296, filed 12/22/11. Illya claims he was unemployed for ten years, but before that (the year at issue) he ran a landscaping business; he couldn’t get the records to show income and expense because of the order of protection his ex-wife got against him, and a criminal case he was dealing with. He went to an individual (qualifications unspecified) to have his taxes done. He claims she made up numbers, especially his income, although some (his deductions) were accurate. He claims he sent in the return without reading it, although he signed it under penalty of perjury. Judge Wherry says he must have had some of the expenses his return showed and that he testified to, so giving Illya a 75% Cohan haircut (proved allowable expense but not amount), he nevertheless refuses to abate one penny of Illya’s income as stated, and sticks him with nonpayment and accuracy penalties as well.
Third, John C. Hughes, 2011 T. C. Mem. 294, filed 12/22/11. John protests a notice of lien. He claims he had no equity in his house and moved out anyway. He also claims he has only Social Security to live on, the lien hurts his credit, he sometimes can’t pay his bills and his income is below the median income for his home state of Georgia. Judge Wells gets this prize package, and unwraps it thus. The lien covers all property, real and personal, now owned or hereafter acquired, until tax paid or lien expires as provided by law. If Johnny is broke now, tomorrow is another day, as they say in Georgia. Every tax lien hurts the taxpayer’s credit, but John never claimed he could pay what he owed if the lien were lifted, and even if he could pay if it were lifted, IRS has discretion. And half the population of Georgia has income below the median, cause that’s what the median is, Johnny, half above, half below. Oh yeah, and John hadn’t paid taxes for at least eight years. IRS wins.
Fourth, Wayne Lasier Wilmot, 2011 T. C. Mem. 293, filed 12/22/11. I wanted to give this more space, but on reflection it doesn’t deserve it. Lasier was an oceanographer-turned-photographer, but he still worked for NOAA and taught at Johns Hopkins. He claimed his $50K-plus annual losses from what he called his photography business. But he put no photographs into evidence, he had no business plan or separate business bank account, he turned down work because he didn’t like it, he lost money every year for six years; and even if IRS conceded in one subsequent year he was engaged in business, that doesn’t bind IRS for any other year, especially not the year at issue. Judge Morrison goes through the for-profit laundry list, and washes Lasier out.
Finally, Terry L. and Cheryl A. Wright, 2011 T.C. Mem. 292, filed 12/22/11. We’ve heard this same old song before, the foreign currency Section 1256 shuffle. Ter and Cher need to bury a big gain, so they buy offsetting euro options, like our old pals Ricky and Tari Garcia, 2011 T.C. Mem. 85, filed 4/13/11; see my blogpost “An Option Isn’t a Contract”, 4/14/11. As with Ricky and Tari, Ter and Cher could walk away if the price of the euro didn’t hit the sweet spot, they didn’t have to deliver the currency on the magic date if they didn’t want to, and the options weren’t traded on any exchange. Ter and Cher’s argument when confronted with Garcia? Tax Court was wrong about Garcia. Judge Wells’ reply: No we weren’t wrong, you’re wrong, you flunk the Section 1256(g)(2) tests, and you’re out.
Best wishes to all for a Merry and a Happy. And good health and prosperity.
CAN TAX COURT BE HABIT-FORMING?
This is the lesson Judge Holmes, a judge who writes like a person and not like a lawyer, is trying to teach Erik McBride Thompson, in 2011 T.C. Mem. 291, filed 12/19/2011.
Erik started by trying to do good, and ended up by doing well. Erik, a son of the pioneers in tiny Milan, Minnesota (population 300), went to Stanford University. There, he earned three degrees. From there, he went to Truk, once Japan’s Gibraltar of the Pacific and now a proud member of the Federated States of Micronesia, with the Peace Corps. Leaving the South Pacific, he returned to Milan, where he ran the Prairie Sun Bank and the Prairie Land & Lumber Company. In short, Erik was a very big bullfrog in the Milan pond.
But the call of the islands was irresistible, so Erik imported 100 Trukians to work in the local meatpacking plant. This move prospered Milan so well that Erik got considerable green fallout therefrom. But domestic tranquility wasn’t enough; Erik decided the wars in Iraq and Afghanistan were immoral and illegal, so he had to do something.
Or rather, not do something: he didn’t file proper returns or pay his income taxes.
With the usual result. IRS descended upon the banker-lumberjack with Substitutes for Returns, SNODs and breathings of fire and slaughter. After Erik spent a year fiddling around in Appeals to no visible purpose, and filed his petition with Tax Court, IRS sent Erik a Branerton letter (see Branerton Corp. v. Commissioner, 61 T.C.691, 692 (1974)) which is a way to commence informal discovery without resort to formal demands; to try to agree on exhibits and facts before hitting the real matters in dispute.
Erik’s reply was not quite in line. Judge Holmes: “‘You may be curious about my decision not to file * * * my actions are designed to call us back to the rule of law and stop the slaughter of innocents.’ The letter goes on at some length but leaves no doubt that Thompson intended to resist paying taxes because he disapproved of the wars in Iraq and Afghanistan.” 2011 T.C. Mem. 291, at pp. 4-5.
Erik waxed eloquent about the Nuremberg Principles. The Nuremberg Principles provided that compliance with the law would be no excuse for those tried if the conduct would be complicit in, for example, a crime against humanity. United States v. Malinowski, 472 F.2d 850, 856 n.7 (3d Cir. 1973). 2011 T.C. Mem. 291, at p. 5, footnote 5.
However, Judge Holmes was less concerned with Erik’s hypothetical trial before an international war crimes court than about his approaching trial in United States Tax Court, and told Erik that if he didn’t provide some evidence 14 days before trial, he would be precluded from producing any at trial.
So Erik coughed up some paper. Judge Holmes, however, moved things right along. “But when we called the case for trial, Thompson still banked on a continuance. As the Commissioner reminded us, however, Thompson had spent almost a year with the Appeals officer doing nothing. We therefore denied his request.
“This finally jolted Thompson into action.” 2011 T.C. Mem. 291, at pp. 5-6.
Erik claimed investment interest carryforwards that would wipe out his past due taxes. Judge Holmes explains in “people talk” what investment interest is, in footnote 7 at page 6 of his decision, to which I refer everyone. As I said, here is a Judge who uses “people talk”. And the best part of his decisions is in the footnotes, where he explains things.
Erik has a problem with his investment interest claim. He can prove some payments of interest, but not that the loan was intended, and the loan proceeds were used, to purchase investment property. “The purpose is crucial because it determines whether the interest paid is deductible. When we know a taxpayer paid a deductible expense, we sometimes can estimate the amount. See Cohan v. Commissioner, 39 F.2d 540, 543-44 (2d Cir. 1930). The converse does not hold true–knowing the amount (without more) does not let us estimate that an item is deductible.” 2011 T.C. Mem. 291, at p. 11, footnote 12.
“It’s true that if an issue is untimely raised–unfairly surprising the opposing party by not giving him a chance to adequately address it at trial–-we’ll refuse to consider it.
“But we disagree with Thompson’s premise. The Commissioner didn’t raise this issue for the first time on brief; he raised it at trial. (And considering Thompson hadn’t bothered giving the Commissioner anything relating to his deductions and losses until one week before trial, this was no small feat.)” 2011 T.C. Mem 291, at pp. 13-14 (Citations and footnotes omitted–but go back and read them).
Erik’s disputed deductions are disallowed for failure to sustain his burden of proof, and since no exception to penalties applies to him, Erik gets the full carload.
Not one whit deterred, Erik apparently girds his loins for future voyages of discovery before the panel of the USTC. “Petitioner is on a fact-finding journey through the Tax Court and any encouragement of delay, hindrance, or cost increasing would be directed at future proceedings. Petitioner does not ‘disregard * * * the rules of this court,’ but rather hopes to learn them and possibly use them in the future.” Answering Brief for Petitioner at 9-10.” 2011 T.C. Mem. 291, at p. 16, footnote 15.
To cool Erik’s ardor, Judge Holmes fires a parting shot: “A final word of caution. Thompson seems to welcome future opportunities to come to the Tax Court. We can help pro se litigants with legitimate claims, but not those who make frivolous arguments. Perhaps Thompson believes conflating the two is worth the risk; he is now cautioned that section 6673 allows the Court to impose sanctions of up to $25,000 on taxpayers making frivolous arguments.” 2011 T.C. Mem. 291, at p. 16 (footnote omitted).
Erik, you did good, you did well, now leave well enough alone.
IRS has come up with fresh regulations on the due-diligence requirements for preparers of EITC returns. See my blogpost “The $500 Misunderstanding”, 10/25/11.
In 27 pages, IRS says that (a) providers of generic information about EITC to walk-ins at a tax preparer’s office are not non-signing preparers and don’t have to worry about the $500 penalty; (b) a firm cannot be subject to the $500 penalty unless one of the following three conditions is satisfied: (1) a member of the principal management of the firm knew of the failure to comply with the due diligence requirements; (2) the firm failed to establish reasonable and appropriate procedures to ensure compliance with the due diligence requirements; or (3) the firm failed to comply with its reasonable and appropriate compliance procedures through willfulness, recklessness, or gross indifference; and (c) retention of EITC records no longer runs three years from filing of the return (because the taxpayer may take the return from the preparer and file it themselves, and preparer cannot know when, or whether, taxpayer filed), but for the period ending three years after the later of the date the tax return or claim for refund was due or the date it was transferred in final form by the tax return preparer to the next person in the course of the filing process.
Nit-pickers, obsessive-compulsives and terminal insomniacs may find the complete text at FR Doc. 2011-32487 Filed 12/19/2011 at 8:45 am; Publication Date: 12/20/2011.
The old saying “the lawyer who represents himself has a fool for a client” is proven once more in Peter A. McLauchlan, 2011 T.C. Mem. 289, filed 12/19/11. Pete was a partner in a Texas law firm during the years at issue (identity of law firm sealed by Court at Pete’s request; pseudonymously AR), but tax wasn’t his area of expertise.
Of course, he prepared his own returns. And of course his firm affiliation can be found by doing a simple Google search. Sealing a person’s professional affiliation in the Internet Age is like trying to hide a Great White Shark in your bathtub, but we’ll keep it anonymous here.
At least he didn’t represent himself before Tax Court.
Pete claimed some Schedule C expenses that were reimbursable by his firm’s policy, with no countervailing custom or practice, and for some of which he was reimbursed. He had some pass-through charitables and depreciation, and those gimmes Judge Kroupa let him have.
As for the reimbursables, AR had a policy: “AR had a written reimbursement policy that specifically provided for reimbursement of certain indirect AR expenses. Reasonable travel expenses were reimbursable, including expenses related to client maintenance and development. Interoffice travel expenses involving an automobile were reimbursable. Lease and rental automobile expenses incurred for client travel were reimbursable. Business meals and entertainment were reimbursable if authorized and approved. Continuing legal education expenses were reimbursable if approved.
“The written reimbursement policy, however, also provided that in-town transportation (i.e., transportation within a 20- mile radius of an attorney’s home office) expenses and spousal travel expenses were not reimbursable.
“As a matter of routine practice, AR would reimburse other indirect AR expenses that were not provided for in the written reimbursement policy, including State bar membership expenses and professional organization expenses. AR did not have a limit on the amount for which a partner could be reimbursed. Reasonableness, rather, was the overarching standard for approving reimbursement of indirect AR expenses. AR would deem an expense unreasonable if it was personal, excessive or not in AR’s best interests.” 2011 T.C. Mem. 289, at p. 4.
Pete’s Schedule C expenses were, he claimed, unreimbursed expenses. IRS said if they were proper expenses properly paid (which they didn’t concede), they were partnership expenses paid by a partner, and therefore not deductible by the partner. Judge Kroupa: “Generally, a partner may not directly deduct the expenses of the partnership on his or her individual returns, even if the expenses were incurred by the partner in furtherance of partnership business. Cropland Chem. Corp. v. Commissioner, 75 T.C. 288, 295 (1980), affd. without published opinion 665 F.2d 1050 (7th Cir. 1981). An exception applies, however, when there is an agreement among partners, or a routine practice equal to an agreement, that requires a partner to use his or her own funds to pay a partnership expense. Id.; Klein v. Commissioner, 25 T.C. 1045, 1052 (1956).
“The AR partnership agreement required petitioner to pay indirect AR expenses that were unreimbursable. There was no routine practice at AR that required petitioner to pay any other AR expenses. Accordingly, the expenses at issue are deductible if they were (1) indirect AR expenses, (2) unreimbursable and (3) actually incurred.” 2011 T. C. Mem. 289, at pp. 6-7.
Examining the expenses, the AR partnership agreement, and Pete’s own “general and vague” and “self-serving, unverified and undocumented” testimony (2011 T.C. Mem. 289, at p. 9), Judge Kroupa finds Pete never was denied reimbursement for anything he claimed, and his in-town, nonreimbursable automobile deductions hit the Section 274(d) roadblock. Strict substantiation: nothing else will serve, but again Pete offers only “general, vague, self-serving and uncorroborated testimony”, 2011 T. C. Mem. 289, at p. 11.
Game over for Pete’s Schedule C.
Now for the Section 6662(a) accuracy penalty. After the ritual incantation, Judge Kroupa nails Pete: “A taxpayer is not liable for an accuracy-related penalty, however, if the taxpayer acted with reasonable cause and in good faith with respect to any portion of the underpayment. Sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs. The determination of whether a taxpayer acted with reasonable cause and in good faith depends on the pertinent facts and circumstances, including the taxpayer’s efforts to assess his or her proper tax liability, the knowledge, experience and education of the taxpayer, and the reliance on the advice of a professional. Sec. 1.6664-4(b)(1), Income Tax Regs.
“Petitioner is well educated and has been an attorney for over 20 years. He prepared his own Federal income tax returns for the years at issue. Petitioner admitted that he had difficulty preparing his tax returns, yet he failed to seek the assistance of a tax professional.
“Moreover, the full amount of each underpayment resulted from petitioner repeatedly disregarding the rules and regulations on reporting income and claiming deductions against income. Petitioner failed to offer any persuasive evidence that he acted with reasonable cause and in good faith in disregarding the relevant rules and regulations.” 2011 T. C. Mem. 289, at pp. 12-13.
So Pete loses–all the way.
Takeaway–Hire your tax professional before you get to trial. Hire them even before you do your own return.
Papa Allen and his sons are fighting over the boodle, when the kids bought out Papa via a cashless stock option in Allen L. Davis, et al., 2011 T.C. Mem. 286, filed 12/12/11. Judge Kroupa faces an all-star cast of lawyers in this consolidated proceeding (fourteen for the battling Famous Famiglia Davis, and four for IRS). This is a “whipsaw”–someone owes big-time tax, and IRS doesn’t care who.
Briefly, Papa Allen fronted the kids $100K to open a business called Check-N-Go, a payday lender. In the old days, it was six for five in seven days, or three broken fingers in eight; the sharks would lend a worker five dollars and get back six dollars in seven days. Should the worker not pay, the appropriate digits would. Now, in these enlightened days with direct wage deposit, the shark just gets a check in advance for the amount lent, and cashes it electronically on the magic day–perfectly legal–and nobody gets hurt.
Now the business took off. Papa Allen just happened to have been a banker, and he had to stay in the business so the kids could get bank loans and expand the business. Did they ever; the business grew at a 37% annual rate. Now the business was a Sub S, with the kids, and some of their cronies who also bankrolled them in the earlies, as shareholders, along with Papa Allen.
There were various buyout and rights of first refusal, so when Mama Allen tried to dump Papa Allen and grab half his stock, the kids threatened to use the buy-sell to pick Mama Allen’s pocket on the way to the courthouse.
Finally, Papa Allen wants to take the money and run, he and the kids having taken turns kicking one another off the Board of Directors and out of management. The kids were now making it on their own (we don’t need no stinkin’ gratitude). So Papa Allen cashes out for $36 million, according to IRS, and $25,31,378.30, (so in original, at p. 14) according to Papa Allen’s pet appraiser, via a redemption of his stock, called the cashless option, by the corporation per an amended buy-sell. Judge Kroupa dumps the appraisal, stating that the stock could not be readily valued, the strike price for the redemption was negotiated after the kids had fought with Papa Allen, and so the price was freely negotiated. And to use Papa Allen’s appraiser’s valuation means the corporation would be taking a big loss on the redemption.
Judge Kroupa says the kids credibly testified that Papa Allen got the redemption deal because they needed to keep him in management to secure bank financing, and needed his banking creds to keep their lenders happy. Besides, the redemption agreement required Papa Allen to notify the corporation if he was electing Section 83(b) treatment and recognizing gain in the year he got the redemption option. If it isn’t compensation, Section 83 doesn’t apply, so why mention it?
Now that it’s compensation, is it reasonable? Section 162 doesn’t help. But Judge Kroupa takes a practical approach. “At the time the agreement was entered into, it was fair to CNG [the corporation]. Allen threatened to leave CNG unless he was given the opportunity to maintain his ownership interest in CNG. CNG, however, needed Allen to secure financing. The bank group extended CNG credit only because of Allen’s experience at Provident, and the covenant in the credit agreement required Allen’s participation in the day-to-day management of CNG. CNG needed that financing to fuel its exponential expansion.
“CNG was exceptionally successful from the time the Allen Option was granted to the time it was exercised. During that period, CNG opened 272 new stores. CNG’s revenues increased approximately 37 percent from $199.3 million to $272.7 million, and its EBITDA increased approximately 40 percent from $44.6 to $62.3 million.
“This success was mostly attributable to Allen. CNG could not have expanded as quickly as it did without Allen because the covenant requiring Allen’s participation in CNG’s management was not removed until the credit agreement was renegotiated in September 2004. ‘An employee responsible for the financial success and growth of a large and complex enterprise is entitled to substantial compensation.’ Lundy Packing Co. v. Commissioner, T.C. Memo. 1979-472; see also Albert Van Luit Co. v. Commissioner, T.C. Memo. 1975-56.” 2011 T. C. Mem. 258, at pp. 19-20.
So with this tribute to his business acumen and managerial skill, Judge Kroupa sticks Papa Allen with $36 million in income, and a Rule 155 bean-count to enjoy. Meantime the kids and cronies split a $36 million flow-through deduction against ordinary income.
Takeaway–Nothing like building a successful business to get you slammed by your family and the IRS.
Taking his cue from John Osborne’s 1956 London hit, thus instructs STJ Dean, in Abdelrahman Rabie, 2011 T.C. Sum. Op. 137, filed 12/12/11. AbRab overpaid his taxes in the year at issue, but IRS issued a SNOD claiming he underpaid. After concessions, everyone agrees AbRab overpaid. But the lookback in Section 6512(b)(3)(b) bars his refund.
AbRab never filed his return for that year until three and a half years later. He did timely file an undated 4868 auto-extension, but that showed a balance due. Then, two years after his return was due (as extended), he sent IRS a letter apologizing for not filing but claiming he always got a refund in the past. He sent in a return, and what he styled a “corrected return”, a year after that, which “corrected return” everyone agrees finally got AbRab’s numbers right.
Now, does AbRab get a refund? STJ Dean says no.
“A taxpayer seeking a refund of overpaid taxes ordinarily must file a timely claim for a refund with the IRS that meets the requirements of section 6511. That section contains two separate provisions for determining the timeliness of a refund claim: The taxpayer must file a claim for a refund ‘within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.’ Sec. 6511(a)(1).
“Section 6511 also defines two ‘lookback’ periods: if the claim is filed ‘within 3 years from the time the return was filed’, then the taxpayer is entitled to a refund of the portion of the tax paid within the 3 years immediately preceding the filing of the claim plus the period of any extension of time for filing the return. Sec. 6511(b)(2)(A). If the claim is not filed within that 3-year period, then the taxpayer is entitled to a refund of only that ‘portion of the tax paid during the 2 years immediately preceding the filing of the claim.’ Sec. 6511(b)(2)(B). If no claim has been filed the refund cannot exceed the amount that would be allowable under section 6511(b)(2)(A) or (B) if a claim was filed on the date the refund is allowed. Sec. 6511(b)(2)(C).” 2011 T. C. Sum. Op. 137, at pp. 4-5.
AbRab says he did make a claim, albeit informally, in his 4868 or in his “so sorry but I always get refunds” letter. And those, he says, were timely.
In fact, even a 37-page letter was found insufficient in Martin v. United States, 833 F.2d 655 (7th Cir. 1987), because “…to be considered an adequate informal claim, the writing must be ‘sufficient to apprise the IRS that a refund is sought and to focus attention on the merits of the dispute so that an examination of the claim may be commenced if the IRS wishes.’” 2011 T.C. Sum. Op. 137, at p. 7. The taxpayer in Martin never said a refund was wanted, or demanded an IRS administrative review of the return.
IRS need not launch an independent investigation into every piece of paper or e-correspondence it receives. IRS need not, like Peer Gynt in Ibsen’s play, “go round about”. AbRab never said “I want a refund.” He only said he always got one before, and took three and a half years to get the numbers right. His 4868 was insufficient, because it showed a balance due. Even so, in the past a 4868 was held to be sufficient notice when taken together with other documents submitted by the taxpayer (Kaffenberger v.United States, 314 F.3d 944, at pp. 955-956 (8th Cir. 2003). But AbRab’s letter wasn’t specific enough.
Nevertheless, AbRab might be OK in Tax Court, even if not with IRS.
“A taxpayer seeking a refund in this Court, however, does not need to actually file a claim for refund with the IRS. He need only show that the tax to be refunded was paid during the applicable lookback period. Sec. 6512(b). In this case, the applicable lookback period is set forth in section 6512(b)(3)(B), which provides that this Court cannot award a refund of any overpaid taxes unless it first determines that the taxes were paid ‘within the period which would be applicable under section 6511(b)(2) * * * 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’.
Unhappily for poor ol’ AbRab, the SNOD got mailed to him after the three-year window had closed, so he was out of luck even if the three-year lookback applied.
Takeaway–Every letter to IRS should say “I want a refund”. If you file a 4868 and can state in good faith that you overpaid, write on the front in big letters “I want a refund”. And tell ‘em AbRab sent you.

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