Court Opinion

ID: 4334769
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:52:25.419018+00
Date Added: 2024-06-11T14:47:00.905482
License: Public Domain

122 T.C. No. 4

                  UNITED STATES TAX COURT

       SUNOCO, INC. AND SUBSIDIARIES, Petitioner v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 19631-97.         Filed February 4, 2004.

          Respondent asks the Court to dismiss for
     lack of subject matter jurisdiction petitioner’s
     overpayment claims under sec. 6512(b), I.R.C.,
     for the years in issue to the extent that they
     involve interest computed under sec. 6611(a),
     I.R.C., so-called overpayment interest.

          Held: On the basis of Estate of Baumgardner
     v. Commissioner, 85 T.C. 445 (1985), the Court
     has jurisdiction.

     Robert L. Moore II, Thomas D. Johnston, and

Majorie A. Burnett, for petitioner.

     John A. Guarnieri, Craig Connell, and Keith L. Gorman,

for respondent.
                              - 2 -

                             OPINION

     WHALEN, Judge:     This case is before the Court to

decide respondent’s motion to dismiss for lack of

subject matter jurisdiction filed with regard to certain

claims petitioner made in an amendment to its petition.

The issue raised by respondent’s motion is whether this

Court lacks jurisdiction under section 6512(b) to consider

petitioner’s claims for overpayment to the extent that they

involve so-called overpayment interest, as described below.

All section references are to the Internal Revenue Code for

the years at issue.    We believe that the issues in this

case are controlled by our Opinion in Estate of Baumgardner

v. Commissioner, 85 T.C. 445 (1985).       On that basis, we

hold that we have jurisdiction to determine an overpayment

composed of overpayment interest.       Therefore, we will deny

respondent’s motion.

                           Background

     Petitioner filed the instant petition for

redetermination of deficiencies respondent determined for

1979, 1981, and 1983.    Petitioner later filed an amendment

to its petition that makes reference to the fact that

petitioner and respondent had settled various issues with

regard to the years in issue.    The amendment to petition

claims additional overpayments for each of those years due
                            - 3 -

to errors allegedly made by respondent “in calculating the

interest on underpayments and overpayments arising out of

the settled issues”.   The amended petition alleges that in

calculating interest respondent used “numerous incorrect

starting and ending dates for the running of interest”

and “numerous incorrect dates in applying payments and

credits and making transfers to other accounts” and that

“respondent failed to credit or refund the correct amount

of interest on petitioner’s overpayments.”   In addition,

the amended petition alleges that “respondent did not use

netting principles when calculating the interest balances”

and “in addition to the overpayments referenced above,

petitioner seeks overpayments attributable to the

calculation of interest utilizing netting principles.”

In general, according to the amended petition, for each

of the years in issue, the interest respondent charged

on “underpayments” under section 6601 was too high,

and the interest respondent allowed with respect to

“overpayments” under section 6611 was too low.

     The amended petition asserts that the overpayment

for each of the years in issue is as follows:
                                         - 4 -
                          Respondent’s     Petitioner’s
Year                        Totals         Computation              Overpayment
                                               1
1979       Underpayment   $1,948,026            $1,353,083           -$594,943
             interest
                                               1
           Overpayment    -4,304,396            -6,346,670          -2,042,274
             interest

            Total         -2,356,370               -4,993,587       -2,637,217

1981       Underpayment    231,936                   -0-              -231,936
             interest
                                           2
           Overpayment -11,626,105          -48,785,132             -37,159,027
             interest

            Total         -11,394,169          -48,785,132          -37,390,963

1983       Underpayment       24,970                 -0-               -24,970
             interest
                                               3
           Overpayment    -3,317,982            -5,759,613          -2,441,631
             interest

            Total         -3,293,012           -5,759,613           -2,466,601
       1
           As of Dec. 14, 1993.
       2
           As of Mar. 3, 1997.
       3
           As of June 14, 1993.

       Attached to respondent’s motion to dismiss is the

affidavit of an employee of the Internal Revenue Service,

a former technical analyst, who is knowledgeable about

the preparation of interest computations on Federal tax

liabilities and who has had extensive experience with

the computerized records of the Internal Revenue Service,

referred to as transcripts of account, which reflect

account activity, such as assessments, payments, credits,

and the like, for particular taxpayers.                         The Government’s

affidavit includes, as an exhibit, a document that was

prepared on behalf of petitioner entitled “Listing of

Differences-–Sun’s Interest Computations v. IRS’ Interest
                            - 5 -

Computations.”   This exhibit is referred to herein as

petitioner’s list of differences.   It is petitioner’s list

of each of the errors that respondent allegedly made in

computing interest.

     There is also attached to the Government’s affidavit

petitioner’s computation of the amount of interest that

would have accrued with respect to petitioner’s account for

each of the years in issue if the differences described in

petitioner’s list were taken into account.    Finally, there

are attached to the Government’s affidavit three schedules

that were prepared on behalf of respondent to verify the

accuracy of petitioner’s computations.    We note that,

while we have been provided with petitioner’s interest

computations and respondent’s verification of petitioner’s

computations, we have not been supplied with respondent’s

computations of interest.

      On the basis of the information in the record, we

have prepared three appendixes in which we have reproduced

petitioner’s computation of interest for each of the tax

years in issue, 1979, 1981, and 1983.    These appendixes are

attached hereto as appendixes 1, 2, and 3, respectively.

     Each appendix is in the nature of a transcript of

petitioner’s account with the Internal Revenue Service for

one of the years in issue; i.e., 1979, 1981, or 1983.     It
                             - 6 -

shows all of the transactions that affect the balance of

petitioner’s account for the year.    These transactions are

shown in the appendix in the column designated “Other

Events” (col. G).    Some “events” increase petitioner’s

liability, such as income tax assessments, refunds, and the

application of interim overpayments from the current year

to the tax liability for other years.    These are shown as

positive numbers.    Other “events” reduce petitioner’s

liability, such as tax payments, the carryback of a net

operating loss from a later year, or the carryback of a

foreign tax credit from a later year.    These are shown as

negative numbers.

     Each appendix shows the balance of petitioner’s

account as of various dates.    The account balance on a

particular date may be a positive number, indicating an

interim underpayment, or a negative number, indicating an

interim overpayment.

     The account balance on a particular date comprises

the prior transactions that were booked to the account,

such as tax payments by petitioner, refunds to petitioner,

and the like.   The account balance also includes the

interest computed on prior balances as noted in the columns

designated overpayment interest (col. H) and underpayment

interest (col. I).
                            - 7 -

     Interest is computed on the balance of petitioner’s

account as follows.   If the account balance is positive at

the time interest is computed, i.e., indicating an interim

underpayment, then the interest on that balance is so-

called underpayment interest and is computed under section

6601(a) (see col. I).   If the account balance is negative

at the time interest is computed, i.e., indicating an

interim overpayment, then the interest on that balance is

so-called overpayment interest and is computed under

section 6611(a) (see col. H).   The number of days and the

interest factors used in the interest computation are shown

in each appendix.   The amounts of underpayment interest and

overpayment interest computed in these appendixes correlate

with the amounts computed by petitioner and verified by

respondent, except that there is a difference of less than

$1 in 1981.

     The parties agree that for each of the years in issue,

the balance of petitioner’s account with the Internal

Revenue Service comprises the transactions recorded in the

column entitled “Other Events” in the appropriate appendix.

They also agree that the correct dollar amount of each of

those transactions is the dollar amount shown in the

appendix.   Neither party has raised an issue about the

method of computing interest, as reflected in petitioner’s
                            - 8 -

computation and respondent’s verification, or the

percentage interest factors used therein.

     The parties disagree about the dates on which many

of the transactions should be recorded in petitioner’s

account.   The substantive issues raised by petitioner’s

amendment to petition and list of differences all involve

the date on which each of certain of the agreed trans-

actions is recorded in petitioner’s account for purposes of

computing interest.   In general, petitioner contends that

the items noted in its list of differences are transactions

that were recorded in petitioner’s account on dates that

caused either too much underpayment interest under section

6601 to be charged or too little overpayment interest under

section 6611 to be allowed on the account.

     For example, with respect to 1979, petitioner contends

that the amount of underpayment interest respondent charged

in 1979, $1,948,026, is $594,943 too high when compared to

petitioner’s computation of the amount of underpayment

interest, $1,353,083, shown in appendix 1.   Similarly,

petitioner contends that the amount of overpayment interest

respondent allowed for 1979, $4,304,396, is $2,042,274 too

low when compared to petitioner’s computation of the amount

of overpayment interest, $6,346,670, shown in appendix 1.

The following schedule compares the overpayment interest
                              - 9 -

and underpayment interest computed by both parties for each

of the years in issue:

                     Overpayment   Underpayment      Total

   1979 Appendix 1   -$6,346,670      $1,353,083
        Respondent    -4,304,396       1,948,026

       Difference    -2,042,274        -594,943    -$2,637,217

   1981 Appendix 2   -48,785,132         -0-
        Respondent   -11,626,105        231,936

       Difference    -37,159,027       -231,936    -37,390,963

   1983 Appendix 3   -5,759,613          -0-
        Respondent   -3,317,982          24,970

       Difference    -2,441,631         -24,970    -2,466,601

     In considering the issues raised by respondent’s

motion, it is important to note that the interest computed

at any particular time is based upon the outstanding

balance in petitioner’s account.       An interest factor is

applied to that balance for the number of days that elapsed

before the date of the next event that changed the account

balance, or before the date of a change in the rate of

interest.   If the effective date of a transaction were

changed, then that would not only cause the account balance

to change; it would also cause the amount of interest, and

possibly the kind of interest (i.e., underpayment or

overpayment interest), computed on that balance to change.

Furthermore, the aggregate amounts of underpayment and
                           - 10 -

overpayment interest computed for the year would also

change.

     For example, if petitioner’s computation for 1979 were

changed to reflect respondent’s position with respect to

one of the issues raised by petitioner for that year, the

effective date of the carryback of a foreign tax credit of

$3,876,645 from 1981, then the resulting recomputation of

the account is shown in appendix 4.   As shown in appendix

4, making that one change causes the aggregate amount of

underpayment interest to be increased to $2,021,767 (see

appendix 4) from $1,353,083 (see appendix 1), and it causes

the aggregate amount of overpayment interest to be reduced

to $5,272,357 (see appendix 4) from $6,346,670 (see

appendix 1).   This illustrates the fact that the

computations are interrelated, and underpayment interest

and overpayment interest cannot be computed separately.

                         Discussion

     This Court exercises only such jurisdiction as is

conferred on it by statute.   See sec. 7442.   By statute,

we are authorized to redetermine the amount of a

deficiency for a particular taxable period as to which the

Commissioner issued a notice of deficiency and the taxpayer

petitioned the Court for review.    See secs. 6212, 6213, and

6214; Monge v. Commissioner, 93 T.C. 22, 27 (1989).     As to
                                - 11 -

any such taxable period for which a petition was filed in

this Court, if we find there is no deficiency, then we are

authorized to determine the amount of an overpayment.       See

sec. 6512.    Our jurisdiction to determine an overpayment is

set forth in section 6512(b)(1) and (3), which provides in

pertinent part:

     SEC. 6512(b).    Overpayment Determined by Tax Court.--

                  (1) Jurisdiction to determine.--Except
             as provided by paragraph (3) * * * 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
             * * *.

                       *    *    *   *   *   *   *

                  (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 * *
             *.

     During the pendency of a case in this Court, our

jurisdiction is exclusive, and, with a few exceptions,

another proceeding may not be commenced or, if already

commenced, is stayed.      See secs. 6213(a), 6512(a), 7422(e);

Hallmark Cards, Inc. v. Commissioner, 111 T.C. 266, 271
                           - 12 -

(1998).   The filing of a timely petition in this Court

in response to a notice of deficiency gives the Court

exclusive jurisdiction and precludes the taxpayer from

later bringing a refund suit for the same type of tax for

the same taxable period.   Sec. 6512(a); see Estate of

Ming v. Commissioner, 62 T.C. 519, 521 (1974); Dorl v.

Commissioner, 57 T.C. 720 (1972), affd. 507 F.2d 406 (2d

Cir. 1974).

     Respondent issued a notice of deficiency to

petitioner for the years in issue, and petitioner invoked

our deficiency jurisdiction by filing a timely petition.

In the pleadings, petitioner asserts that there is no

deficiency in any of the years in issue, and it claims an

overpayment for each of those years.   As mentioned above,

petitioner’s overpayment claims include overpayments

consisting in part of interest respondent computed on the

interim underpayment balances reflected in petitioner’s

account, so-called underpayment interest.   Petitioner

contends that the amounts of underpayment interest

respondent computed are too high.   Petitioner’s overpayment

claims also include overpayments consisting in part of

interest computed on the interim overpayment balances

reflected in petitioner’s account, so-called overpayment
                             - 13 -

interest.    Petitioner contends that the amounts of

overpayment interest respondent computed are too low.

     Respondent concedes that this Court has jurisdiction

under section 6512(b) to determine an overpayment based

upon petitioner’s claim that it overpaid underpayment

interest.    Respondent acknowledges that excess underpayment

interest which has been assessed and paid by petitioner

“becomes part of the overpayment, i.e., a payment in excess

of that which is properly due.”       This concession is based

upon Estate of Baumgardner v. Commissioner, 85 T.C. 445

(1985).     Respondent asserts that “the Court, however, does

not have jurisdiction to adjudicate petitioner’s claimed

overpayments to the extent they encompass claims for the

payment of overpayment interest on amounts previously

credited or refunded by respondent.”

     Respondent draws a sharp distinction between

underpayment interest and overpayment interest on the

ground that the former has actually been paid by the

taxpayer and can be part of an overpayment, whereas the

latter has not been paid.     According to respondent, a claim

for overpayment interest imposed by section 6611 is merely

a claim for an additional amount of interest for which the

Government is allegedly liable.       It is not a claim for an

amount that has been overpaid and is legally due.
                          - 14 -

     Respondent argues that a claim for additional

overpayment interest under section 6611 falls under the

general claims jurisdiction of the Federal District Courts

and the Court of Federal Claims.   Respondent asserts that

a suit for the payment of overpayment interest with respect

to overpayments that have previously been refunded or

credited can be prosecuted in a U.S. District Court or the

Court of Federal Claims, even while the Tax Court case

involving the determination of further deficiencies or

overpayments for the same tax period is pending.

Respondent argues that section 6512(a), which provides the

Tax Court with exclusive jurisdiction over the issues

properly before it, does not preclude such a suit.

According to respondent, a suit for recovery of overpayment

interest with respect to overpayments that were not

determined by the Tax Court is not a suit for an amount

that can be refunded, and, thus, it is not, by definition,

within the Court’s jurisdiction.

     Furthermore, respondent argues that section

6512(b)(4), which provides that the Court has no

jurisdiction “to restrain or review any credit or reduction

made by the Secretary under section 6402", deprives the

Court of jurisdiction to consider claims for overpayment

interest with respect to overpayments that were credited
                           - 15 -

to a taxpayer’s liabilities before the taxpayer filed a

petition in this Court.   Respondent argues:

     To the extent petitioner claims that it was not
     credited with sufficient overpayment interest on
     the transferred credits because the liability to
     which the credit was transferred was not
     correctly computed, section 6512(b)(4) precludes
     the courts from considering petitioner’s claim.

     Finally, respondent argues that the overpayments

petitioner seeks on the basis of overpayment interest do

not fall within the Court’s “supplemental jurisdiction”

under section 6512(b)(2) or the Court’s “auxiliary

jurisdiction” in section 7481(c).    Respondent argues that

section 6512(b)(2) will not apply to petitioner’s claims

for overpayment interest because the underlying overpayment

was not determined by the Court.    Similarly, respondent

argues that section 7481(c) will not apply because the

overpayment interest petitioner seeks will not have been

“involved” in an overpayment determined by the Court.

     Our first difficulty with respondent’s argument is the

fact that it is mathematically impossible to compute the

amount of underpayment interest, as to which respondent

concedes that we have jurisdiction, separately and apart

from the amount of overpayment interest, as to which

respondent argues that we lack jurisdiction.    As described

above, underpayment interest is the interest computed under
                           - 16 -

section 6601 on an interim underpayment in petitioner’s

account.   Overpayment interest is the interest computed

under section 6611 on an interim overpayment in

petitioner’s account.   Thus, the underpayment interest

charged to, and the overpayment interest allowed on,

petitioner’s account are both computed on the basis of the

balance of petitioner’s account as of a particular date.

     Petitioner’s account balance, on any given date,

is composed not only of the positive and negative

transactions booked to petitioner’s account for the year,

such as assessments (positive) and payments (negative), but

also of the underpayment and overpayment interest that was

previously computed and combined with the account balance.

See section 6622(a), which provides that, for purposes of

the Internal Revenue Code, interest is “compounded daily.”

     If the account balance on a particular date were to

change, by reason of a change in the amount or the date of

a transaction booked to the account, for example, then the

amount, and possibly the kind, of interest computed as of

that date would also change.   Any such change would ripple

through the account causing later interim balances, and the

interest computed thereon, to change, and further causing a

change in the aggregate amount of each type of interest;

viz underpayment or overpayment.    Compare app. 1 with app.
                           - 17 -

4.   In effect, the aggregate amount of each type of

interest cannot be computed without considering all of the

transactions that were booked to the account and without

also considering all of the interest, whether overpayment

or underpayment, that was previously computed and combined

with earlier account balances.

      As can be seen from the above, in order to compute the

aggregate amount of underpayment interest, it is necessary

for the Tax Court to review the same transactions, and

interest thereon, as involved in the computation of

overpayment interest.   Thus, it would be impossible for

the Court to exercise overpayment jurisdiction with respect

to underpayment interest, unless the Court also had

jurisdiction over overpayment interest.   For the same

reason, it would be impossible for a U.S. District Court

or the Court of Federal Claims to exercise general claims

jurisdiction over overpayment interest without considering

all of the transactions booked to petitioner’s account,

including transactions that are at issue in the Tax Court

case and the amount of underpayment interest charged to the

account.

      As noted above, respondent concedes, on the basis of

Estate of Baumgardner v. Commissioner, 85 T.C. 445 (1985),

that our jurisdiction to determine an overpayment under
                          - 18 -

section 6512(b) includes an overpayment composed of

interest on underpayments computed under section 6601.

Respondent also concedes that the underpayment interest at

issue in this case is indistinguishable from the interest

that was at issue in Estate of Baumgardner.   Respondent’s

motion papers do not address the fact that it is impossible

to exercise jurisdiction over petitioner’s overpayment

claims composed of underpayment interest, in accordance

with our Opinion in Estate of Baumgardner, unless we also

have jurisdiction to determine an overpayment composed of

overpayment interest.

     The issue in this case is whether petitioner’s

overpayment claims based upon the amount of overpayment

interest allowed by respondent involve an “overpayment”

within the meaning of section 6512(b).   There is no

definition of the term “overpayment” in the Code, but in

Jones v. Liberty Glass Co., 332 U.S. 524, 531 (1947),

the Supreme Court defined the term for purposes of the

statutory predecessor of section 6512(b) as “any payment

in excess of that which is properly due.”   The Supreme

Court said:

     we read the word “overpayment” in its usual
     sense, as meaning any payment in excess of that
     which is properly due. Such an excess payment
     may be traced to an error in mathematics or in
     judgment or in interpretation of facts or law.
                            - 19 -

      And the error may be committed by the taxpayer or
      by the revenue agents. Whatever the reason, the
      payment of more than is rightfully due is what
      characterizes an overpayment.

Id.   See also United States v. Dalm, 494 U.S. 596, 610

n.6 (1990), in which the Supreme Court stated that “The

commonsense interpretation is that a tax is overpaid when

a taxpayer pays more than is owed, for whatever reason or

no reason at all.”

      We considered the definition of the term “overpayment”

in Estate of Baumgardner v. Commissioner, supra.     In that

case, the parties settled the issues raised in a notice of

deficiency after the personal representative had petitioned

the Tax Court to redetermine the deficiency.     They agreed

that there was no deficiency and that the estate tax was

less than the amount that had been paid.

      The issue in that case was whether the term

“overpayment” in section 6512(b) could include amounts that

were paid as interest, pursuant to an installment payment

plan under section 6166A.   The Commissioner argued that the

Court was without jurisdiction to decide issues concerning

interest, and that the personal representative had to bring

a separate action in a U.S. District Court or in the

predecessor of the Court of Federal Claims to obtain a

refund of the overpaid interest.     Unlike the present case
                             - 20 -

in which respondent argues that a suit in a U.S. District

Court or the Court of Federal Claims can proceed during the

Tax Court case, in Estate of Baumgardner the Commissioner

acknowledged that such an action could be barred by

expiration of the period of limitations on filing a claim

for refund.   See Estate of Baumgardner v. Commissioner,

supra at 448, 452-453.

      We held that the term “overpayment”, as used in

section 6512(b), includes interest and, accordingly, we

held that “we have jurisdiction to consider interest as

part of an ‘overpayment’”.     Id. at 458-459.   In coming to

that conclusion, we noted that section 301.6611-1(c),

Proced. & Admin. Regs., expressly states that “the amount

of any interest paid with respect to the deficiency * * *

is also an overpayment.”     Id. at 452.

     The principal justification for our holding in Estate

of Baumgardner, however, was based on the symmetry of our

overpayment jurisdiction under section 6512(b) and the

jurisdiction of the U.S. District Courts and the Court of

Federal Claims.   We pointed out that jurisdiction over

overpayments generally rests with the U.S. District Courts

and the Court of Federal Claims, but in the limited

circumstances that the Tax Court is given overpayment

jurisdiction, i.e., in situations where a notice of
                            - 21 -

deficiency has been issued and the taxpayer has petitioned

for review, section 6512(a) provides that the Tax Court

should be able to determine an overpayment to the exclusion

of the other tax forums.    Id. at 451-452.   We noted that

this intent would be frustrated by reading section 6512(b)

to provide that the overpayments which are the subject of

the Tax Court’s jurisdiction are substantially different

from the overpayments which are subject to the jurisdiction

of the other tax forums.    Id. at 451.   Stated differently,

we noted that the “overpayment” determined by the Tax Court

should be synonymous with that determined by a U.S.

District Court or the Court of Federal Claims.    We further

noted that:

       With respect to interest which is part of an
       overpayment, * * * we must be able to determine
       all components of that overpayment or a taxpayer
       unwittingly may not be able to recover interest
       in those situations where the Commissioner
       initially determined a deficiency and the
       taxpayer petitioned to the Tax Court. * * *

Id. at 453.

       In Estate of Baumgardner v. Commissioner, 85 T.C. 445

(1985), we overruled two Opinions of the Court which had

held that the words “an overpayment of tax”, in the

predecessor of section 6512(b), excluded interest.     Id. at

456.    In discussing those Opinions, we said the following:
                          - 22 -

     There was no compulsion to so restrictively read
     this language. This Court could have read the
     phrase “overpayment of tax” as part of the
     threshold necessary to be able to further enable
     the Tax Court “to determine the amount of such
     overpayment.” There was no compelling reason to
     interpret the word “tax” to exclude additions to
     the tax or interest. There was, instead, reason
     to consider interest as part of an overpayment.

     * * * But these opinions have failed to recognize
     that Congress has legislatively provided for the
     exceptional situation where, after a deficiency
     has been determined and the taxpayer has
     petitioned the Tax Court, an overpayment results.
     Although there is no legislative history to
     assist us, it is hard to imagine that Congress
     could have intended to bifurcate an “overpayment”
     by limiting the taxpayer’s refund to “tax” only.
     It is equally hard to imagine that an “overpay-
     ment” has a different meaning depending upon
     the forum. Either of those approaches would
     force some taxpayers to resolve a single tax
     controversy in two different forums. Strangely,
     those forced to unreasonably duplicate their
     costs and efforts would be the lucky ones
     because, as in this case, others would be barred
     from recovery of the interest portion of the
     overpayment due to their failure and/or inability
     to make a timely claim.

Id. at 456-457.

     In passing, we note that Estate of Baumgardner was a

reviewed Opinion of the Court that has been consistently

followed for more than 18 years since it was issued.

See Winn-Dixie Stores, Inc. v. Commissioner, 110 T.C. 291

(1998) (underpayment interest under section 6601 is part

of an overpayment); Bachner v. Commissioner, 109 T.C. 125,

128 (1997) (the term “overpayment” is not defined in terms
                          - 23 -

of the items treated as overpayments by section 6401(a)),

affd. without published opinion 172 F.3d 859 (3d Cir.

1998); Barton v. Commissioner, 97 T.C. 548, 555 (1991)

(increased interest (at 120 percent of the normal rate)

governed by section 6621(c) is part of an overpayment);

Estate of Bell v. Commissioner, 92 T.C. 714, 728 (1989),

(an estate which elected to defer estate tax under section

6166 is entitled to a determination of the overpayment of

interest, as well as a determination of the overpayment

of tax), affd. 928 F.2d 901 (9th Cir. 1991); Judge v.

Commissioner, 88 T.C. 1175, 1187 (1987) (the additions

to tax under section 6651(a)(1) and (2) are part of an

overpayment); Gabelman v. Commissioner, T.C. Memo. 1993-592

(section 6512(b) confers jurisdiction on this Court to

review the amount of an overpayment of tax, including

amounts withheld from the taxpayer’s wages), affd. 86 F.3d
609 (6th Cir. 1996); Johnson v. Commissioner, T.C. Memo.

1993-562 (a deposit is not a payment, and thus this Court

lacks jurisdiction under section 6512(b) to order a refund

of any part of such an amount); see also Bankamerica Corp.

v. Commissioner, 109 T.C. 1 (1997); Centel Communications

Co. v. Commissioner, 92 T.C. 612, 628 (1989), affd. 920
F.2d 1335 (7th Cir. 1990); 508 Clinton Street Corp. v.

Commissioner, 89 T.C. 352, 354 (1987); Pace v. Commis-
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sioner, T.C. Memo. 2000-300; Estate of Wilson v.

Commissioner, T.C. Memo. 1999-221.

     We believe that respondent’s view of what constitutes

an overpayment for purposes of section 6512(b) is too

narrow and does not square with our opinion in Estate

of Baumgardner v. Commissioner, supra.   Contrary to

respondent’s position, we believe that, under certain

circumstances, additional overpayment interest that is

allowable under section 6611(a) with respect to an interim

overpayment is similar to the underpayment interest

involved in Estate of Baumgardner and can constitute an

overpayment for purposes of section 6512(b).

     Most of the overpayments underlying petitioner’s

claims for additional overpayment interest are interim

overpayments that respondent credited against a tax

liability of petitioner for a different year and/or a

different tax, pursuant to section 6402(a).    Subsection (a)

provides as follows:

     SEC. 6402.   AUTHORITY TO MAKE CREDITS OR REFUNDS.

          (a) General Rule.--In the case of any
     overpayment, the Secretary, within the applicable
     period of limitations, may credit the amount of
     such overpayment, including any interest allowed
     thereon, against any liability in respect of an
     internal revenue tax on the part of the person
     who made the overpayment and shall, subject to
     subsections (c), (d), and (e), refund any balance
     to such person. [Emphasis added.]
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     The Commissioner cannot be compelled to credit an

overpayment against a liability of the taxpayer.   See,

e.g., N. States Power Co. v. United States, 73 F.3d 764,

768 (8th Cir. 1996).    If the Commissioner chooses to do

so, however, then section 6402(a) provides that the

Commissioner may credit the amount of the overpayment

“including any interest allowed thereon” against a

liability of the taxpayer, and with certain exceptions,

shall “refund any balance” to the taxpayer.    If the

Commissioner fails to include all or a part of the interest

that is allowable on the overpayment, then the aggregate

amount of the overpayment, plus the allowable interest,

will exceed the amount of the tax liability satisfied by

the credit.    In effect, the taxpayer will have overpaid the

liability by the amount of allowable interest that is not

credited.

     For example, assume that, pursuant to section 6402(a),

the Commissioner credits an overpayment of $1,000 against a

liability of the same taxpayer for a different taxable year

in the amount of $1,000 but fails to include interest of

$20 computed under section 6611 that is allowable on the

overpayment.    Under these facts, the taxpayer would have

used $1,020 to satisfy a liability of $1,000.    In effect,

the taxpayer would have overpaid the liability against

which the overpayment is credited by $20.    That amount

would be “legally due”, to use respondent’s words,
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pursuant to section 6402(a).    Under that provision, the

overpayment, including any interest allowed thereon, may

be credited, but it directs the Commissioner to “refund

any balance” to the taxpayer.    Sec. 6402(a).   To the

extent that overpayment interest under section 6611 is not

credited, we believe that it can be considered to have been

overpaid by the taxpayer for purposes of section 6512(b).

Otherwise, our overpayment jurisdiction would not mirror

the jurisdiction of the U.S. District Courts and the Court

of Federal Claims.   See, e.g., Triangle Corp. v. United

States, 592 F. Supp. 1316 (D. Conn. 1984).

     In exercising overpayment jurisdiction under section

6512(b) with regard to overpayment interest in the case of

overpayments credited or refunded by the Commissioner, we

are not acting in derogation of section 6512(b)(4), as

suggested by respondent.   Section 6512(b)(4) provides that

the Tax Court shall have no jurisdiction “to restrain or

review any credit or reduction made by the Secretary under

section 6402.”   In Savage v. Commissioner, 112 T.C. 46

(1999), for example, the taxpayer’s 1993 return claimed

an overpayment of approximately $10,000, which the

Commissioner credited to the taxpayer’s assessed tax

liabilities for 1990 and 1991.    Thereafter, the

Commissioner issued a notice of deficiency with respect

to 1993, and the taxpayer filed a timely petition.        The

taxpayer argued that the Commissioner had improperly
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determined the taxpayer’s tax liabilities for 1990 and

1991.    We held that we lacked jurisdiction to consider

the matter, pursuant to section 6512(b)(4).

     Unlike Savage, in exercising our overpayment

jurisdiction with respect to overpayment interest on

overpayments that have been credited or refunded by the

Commissioner, we are not called upon “to restrain or

review” the tax liability against which the overpayment

is credited, within the meaning of section 6512(b)(4).

To the contrary, the only issue in this case is whether

the amount of credit should have been higher by reason of

respondent’s failure to allow all or a portion of the

interest on the overpayment.

        To reflect the foregoing,

                                    An appropriate order will

                             be issued denying respondent’s

                             motion to dismiss.
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