Court Opinion

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Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

11-7-1995

Koss v United States
Precedential or Non-Precedential:

Docket 95-1154

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            UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT

                     No. 95-1154

                    DAVID A. KOSS;
                    FREYA B. KOSS,

                                     Appellants

                          v.

               UNITED STATES OF AMERICA

   On Appeal from the United States District Court
      for the Eastern District of Pennsylvania
              (D.C. Civil No. 93-06965)

               Argued October 10, 1995

BEFORE:   GREENBERG, LEWIS, and ROSENN, Circuit Judges

               (Filed: November 7, 1995)

                           David A. Koss (argued)
                           300 East Lancaster Avenue
                           The Wynnewood House
                           Wynnewood, PA 19096

                                Attorney for Appellants

                           Loretta C. Argett
                           Assistant Attorney General
                           Gary R. Allen
                           Kenneth L. Greene
                           Sara Ann Ketchum (argued)
                           Attorneys Tax Division
                           Department of Justice
                           Post Office Box 502
                           Washington, D.C. 20044
                           Michael R. Stiles
                           United States Attorney
                           615 Chestnut Street
                           Philadelphia, PA 19106-4476

                          1
                                         Attorneys for Appellee

                         OPINION OF THE COURT

GREENBERG, Circuit Judge.
                 I.   FACTUAL & PROCEDURAL BACKGROUND

           This matter is before the court on an appeal by

taxpayers in a suit involving claims for income tax adjustments

and refunds.    The facts are not in dispute, and we set them forth

as found by the district court.       Appellant David A. Koss, a

member of the Pennsylvania bar since 1957, agreed with a client

in 1971 to perform legal services in exchange for stock in Video

Systems Corp.    In 1973, a dispute between Koss and his client

over the number of shares to be paid Koss escalated into a court

action.   In January 1974, the parties reached a settlement in

which Koss would receive 22,000 shares on February 1, 1974, as

well as the proceeds from the intended sale of an additional

20,000 shares.    The 22,000 shares were not registered under the

Securities Act of 1933, so their sale to the public was

restricted.

           In their 1974 federal income tax return, Koss and his

wife, appellant Freya Koss, reported the value of the 22,000

shares as $4,400 of gross ordinary income.       In 1977, the Internal

Revenue Service started examining the Kosses' 1974 return.

However, in 1977 the shares became worthless.       While this

examination was pending, the Kosses filed a federal income tax

                                  2
return for 1977 which did not claim a loss sustained on the

22,000 shares of Video Systems stock received in 1974.

          On December 5, 1980, the IRS asserted an income tax

deficiency of $48,788.05 against the Kosses for 1974.1   The

deficiency was attributable to the IRS placing the fair market

value of the 22,000 shares of Video Systems stock at $110,000

rather than $4,400.   On February 28, 1981, the Kosses timely

petitioned the United States Tax Court for a redetermination of

this asserted deficiency.   Ultimately, the Tax Court upheld the

IRS and determined that the Kosses owed $48,788.05.   We affirmed

the decision of the Tax Court.   Koss v. Commissioner, 57 T.C.M.

(CCH) 882 (1989), aff'd, 908 F.2d 962 (3d Cir. 1990).    The Tax

Court decision became final on September 23, 1990, when the time

for petitioning for certiorari expired.

          On August 3, 1991, the Kosses filed an amended tax

return for 1977 indicating that the 22,000 shares of Video

Systems stock had become worthless.   Accordingly, they requested

an adjustment of their income tax liability and a refund of the

$899.07 in tax they paid for that year.   On that same date, the

Kosses also filed an amended tax return for 1974 that requested

an adjustment based on the carryback of the net operating loss

incurred in 1977 due to the worthlessness of the 22,000 shares.

At that time, they paid a tax of $2,148.41 for 1974, which they

computed was the amount due after application of the carryback

1
 We take this figure from the Tax Court opinion. In its brief
the government indicates the figure was $47,788.05.

                                 3
loss.    The IRS disallowed the requested adjustments on November

21, 1993.

            On December 27, 1993, the Kosses brought this action

for recovery of the $899.07 and for allowance of the requested

adjustments on their 1974 return.       The district court entered

summary judgment in favor of the government on December 21, 1994.

It reasoned that the complaint was barred by the statute of

limitations in 26 U.S.C. § 6511 and could not be salvaged by the

mitigation sections at 26 U.S.C. §§ 1311-14.      The Kosses then

timely appealed, asserting that the district court had

jurisdiction under 28 U.S.C. § 1346(a)(1) (civil action against

United States for recovery of tax allegedly erroneously or

illegally assessed or collected) and 26 U.S.C. § 7422 (civil

action for refund).    We have jurisdiction pursuant to 28 U.S.C.

§1291 and exercise plenary review.      See Pleasant Summit Land

Corp. v. Commissioner, 863 F.2d 263, 268 (3d Cir. 1988), cert.

denied, 493 U.S. 901, 110 S.Ct. 260 (1989).

                           II.    DISCUSSION

                  A.   Limitations on Jurisdiction

            The United States "is immune from suit, save as it

consents to be sued . . . and the terms of its consent to be sued

in any court define that court's jurisdiction to entertain the

suit."    United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948,
953 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586,

61 S.Ct. 767, 769 (1941)).       Thus, although 28 U.S.C. § 1346(a)(1)

provides that the district court has jurisdiction over "[a]ny

                                    4
civil action against the United States for the recovery of any

internal-revenue tax alleged to have been erroneously or

illegally assessed or collected . . . under the internal-revenue

laws," other statutory provisions placing requirements or

restrictions on such actions limit and determine the scope of

this grant of jurisdiction.    United States v. Dalm, 494 U.S. 596,

601, 110 S.Ct. 1361, 1364 (1990).

          The statute of limitations in 26 U.S.C. § 6511 is one

such limitation on jurisdiction. The basic rule is as follows:
          Claim for credit or refund of an overpayment
          of any tax imposed by this title in respect
          of which tax the taxpayer is required to file
          a return shall be filed by the taxpayer
          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 . . . .

26 U.S.C. § 6511(a).    Where, however, the claim for credit or

refund relates to an overpayment of income tax on account of bad

debts or worthless securities, the limitations period is "7 years

from the date prescribed by law for filing the return for the

year with respect to which the claim is made."    26 U.S.C.

§6511(d)(1).   A claim for credit or refund of tax brought after

the expiration of the limitations period is outside the district

court's jurisdiction.    United States v. Dalm, 494 U.S. at 602,
110 S.Ct. at 1365.

          In this case, the Kosses seek an adjustment of their

1977 income tax liability and a refund of $899.07 from the tax

they paid upon filing their 1977 income tax return on or before

April 15, 1978.   Under section 6511(d)(1), the applicable statute

                                 5
of limitations expired seven years after that date, or April 15,

1985.     Consequently, the refund claim filed on August 3, 1991, is

barred by the statute of limitations.

             Further, under 28 U.S.C. § 1346(a)(1), a taxpayer

filing suit for an income tax refund must pay the full amount of

the tax prior to filing the suit.     Thus, in Flora v. United

States, the Supreme Court concluded that "§ 1346(a)(1), correctly

construed, requires full payment of the assessment before an

income tax refund suit can be maintained in a Federal District

Court."    362 U.S. 145, 177, 80 S.Ct. 630, 647 (1960); see also

Psaty v. United States, 442 F.2d 1154, 1158 (3d Cir. 1971).        This

requirement defeats the Kosses' claim for an adjustment to their

1974 income tax liability.     As described above, the IRS asserted

a deficiency of $48,788.05 against them for 1974.     The Kosses

filed a petition with the Tax Court for a determination, which

determination became final on September 23, 1990.     Although the

Kosses have not paid the deficiency of $48,788.05, they seek to

adjust their tax liability for 1974 based on (1) the IRS's

determination that the 22,000 shares were worth $110,000 in 1974;

(2) the loss of that amount in 1977 due to the worthlessness of

the stock; and (3) the carryback of the net operating loss

resulting from the loss incurred in 1977.     The Kosses have

labelled their claim as one for an adjustment of their 1974 tax

liability, but the net effect they seek is a credit to be applied

to the outstanding deficiency.     Because they have not paid the

full amount of the asserted deficiency, however, their claim

                                  6
cannot be brought in the district court under 28 U.S.C.

§1346(a)(1).

          As the government correctly points out, this is a no-

win argument for the Kosses.    If they did not pay the full

assessment for the year 1974, they could not bring the claim

under 28 U.S.C. § 1346(a)(1).    If they did pay it, their current

claim would still be barred by the statute of limitations found

in section 6511(d)(2)(A):
          If the claim for credit or refund relates to
          an overpayment attributable to a net
          operating loss carryback . . . , in lieu of
          the 3-year period of limitation prescribed in
          subsection (a), the period shall be that
          period which ends 3 years after the time
          prescribed by law for filing the return
          (including extensions thereof) for the
          taxable year of the net operating loss . . .
          which results in such carryback . . . .

26 U.S.C. § 6511(d)(2)(A) (emphasis added).    The net operating

loss is alleged to have occurred in 1977; the tax return for that

year was required to be filed by April 15, 1978.    The Kosses

filed their 1977 return on or before April 15, 1978, and thus

they had three years, or until April 15, 1981, to bring this

claim to adjust their 1974 tax liability.    Since they did not

bring the claim until 1991, it is time-barred.

          Moreover, the government argues correctly that the

claim to adjust the 1974 tax liability is also barred by section

6512(a), which provides:
          Effect of petition to Tax Court. -- If the
          Secretary has mailed to the taxpayer a notice
          of deficiency under section 6212(a) (relating
          to deficiencies of income, estate, gift, and
          certain excise taxes) and if the taxpayer

                                 7
          files a petition with the Tax Court within
          the time prescribed in section 6213(a)
          . . . , no credit or refund of income tax for
          the same taxable year . . . in respect of
          which the Secretary has determined the
          deficiency shall be allowed or made and no
          suit by the taxpayer for the recovery of any
          part of the tax shall be instituted in any
          court . . . .

26 U.S.C. § 6512(a).   Under this section, filing a petition to

the Tax Court to challenge an asserted deficiency bars the

taxpayer from bringing a suit in any other court for the recovery

of any part of the tax for that taxable year.   See, e.g.,
Solitron Devices, Inc. v. United States, 862 F.2d 846, 848 (11th

Cir. 1989) (section 6512(a) bars any action for taxes for same

taxable year in respect of which taxpayer petitioned Tax Court);

First Nat'l Bank v. United States, 792 F.2d 954, 956 (9th Cir.

1986) (district court has no jurisdiction over redetermination of

estate tax liability previously established in Tax Court), cert.

denied, 479 U.S. 1064, 107 S.Ct. 948 (1987); Bowser v.

Commissioner, 559 F.2d 1207, No. 76-1031, 1977 WL 25925, at *1

(3d Cir. June 10, 1977) ("§ 6512(a) operates as a limitation on
the general jurisdictional grant of 28 U.S.C. § 1346[.]"); Elbert

v. Johnson, 164 F.2d 421, 424 (2d Cir. 1947) ("It is not the

decision which the Tax Court makes but the fact that the taxpayer

has resorted to that court which ends his opportunity to litigate

in the District Court his tax liability for the year in

question."); see also United States v. Dalm, 494 U.S. at 606, 110

S.Ct. at 1367 (noting that taxpayer's petition in Tax Court on

income tax liability precluded relitigation of same in district

court).

                                8
          When the IRS notified them of the deficiency for 1974,

the Kosses did not pay the tax and seek a refund in the district

court.   Rather, they petitioned the Tax Court for a determination

which ultimately became final against them.   Consequently, they

are barred by section 6512(a) from bringing any suit in any court

to litigate their tax liability for 1974.   We realize that when

the Video Systems stock became worthless in 1977, the Kosses

believed that the shares had been worth only $4,400 rather than

$110,000 in 1974, and that they believe that they therefore could

not have asserted a $110,000 loss in the Tax Court. Nevertheless,

the fact that the Kosses are advancing issues that were not

presented to the Tax Court and perhaps could not have been

considered by that court cannot change our conclusion. "[T]he Tax

Court's jurisdiction, once it attaches, extends to the entire

subject of the correct tax for the particular year." Erickson v.

United States, 309 F.2d 760, 767 (Cl. Ct. 1962). Even in cases

where the issues raised by taxpayers in the district court could

not have been litigated in the Tax Court because they arose from

facts occurring after the Tax Court's decision, courts regularly

hold that the petition to the Tax Court bars a subsequent suit in

the district court.   See, e.g., Solitron Devices, Inc. v. United
States, 862 F.2d at 849; United States v. Wolf, 238 F.2d 447, 451

(9th Cir. 1956); Elbert v. Johnson, 164 F.2d at 424.
             B.   Mitigation of Effects of Limitations

                                 9
          In certain instances, the effects of the statute of

limitations may be mitigated.2   26 U.S.C. §§ 1311-14.   While

these mitigation provisions are remedial and should be given a

liberal interpretation, the party invoking them has the burden of

showing that mitigation is permitted.     O'Brien v. United States,

766 F.2d 1038, 1042 (7th Cir. 1985) (citing Olin Mathieson Chem.

Corp. v. United States, 265 F.2d 293, 296 (7th Cir. 1959)).

          Section 1311(a) allows for the correction of certain

types of errors:
          General rule. -- If a determination (as
          defined in section 1313) is described in one
          or more of the paragraphs of section 1312
          and, on the date of the determination,
          correction of the effect of the error
          referred to in the applicable paragraph of
          section 1312 is prevented by the operation of
          any law or rule of law, other than this part
          and other than section 7122 (relating to
          compromises), then the effect of the error
          shall be corrected by an adjustment made in
          the amount and in the manner specified in
          section 1314.

26 U.S.C. § 1311(a).   Section 1313 defines "determination" to

include "a decision by the Tax Court or a judgment, decree, or
other order by any court of competent jurisdiction, which has

become final."   26 U.S.C. § 1313.    The Kosses claim the Tax

Court's decision to value the shares at $110,000 and the 1974 tax

2
 Though this point is by no means clear, we will assume without
deciding that, notwithstanding the Kosses' failure to pay the
1974 tax assessment in full, and notwithstanding their
institution of the Tax Court proceeding for that year, if the
mitigation provisions were by their terms applicable here, we
could apply them to grant the Kosses relief. In this regard, we
note that the government's brief does not contend expressly that
these procedural hurdles render the mitigation provisions
inapplicable for 1974.

                                 10
deficiency at $48,788.05 falls within this definition of

"determination."

          The Kosses contend that this determination further is

described in section 1312(7)(A), which provides in relevant part:
          (A) General rule. -- The determination
          determines the basis of property, and in
          respect of any transaction on which such
          basis depends, or in respect of any
          transaction which was erroneously treated as
          affecting such basis, there occurred, with
          respect to a taxpayer described in
          subparagraph (B) of this paragraph, any of
          the errors described in subparagraph (C) of
          this paragraph.

26 U.S.C. § 1312(7)(A).   They further contend that the

determination resulted in an error described in section

1312(7)(C)(ii):
          (C) Prior erroneous treatment. -- With
          respect to a taxpayer described in
          subparagraph (B) of this paragraph --
                     . . . .
                (ii) there was an erroneous recognition,
          or nonrecognition, of gain or loss . . . .

26 U.S.C. § 1312(7)(c)(ii).    In particular, the Kosses argue that

there was an erroneous nonrecognition of the loss of $110,000 on

their 1977 return, and that this error was not rectifiable at the

time of the determination due to the expiration of the statute of

limitations in section 6511.   Br. at 11-12.

          The problem with this argument is that the error they

specify was not due to the determination by the Tax Court of the

1974 basis of the shares.   The nonrecognition in the 1977 return

of the loss of the value of the shares was caused by the Kosses'

failure to declare that they had any loss at all.   Thus, if they

had declared in their 1977 return the loss of the value of

                                 11
securities (which they claimed to be worth $4,400), then the Tax

Court's determination would have caused an error of

nonrecognition of a loss of $110,000 less $4,400, or $105,600. In

any event, this causal factor cannot help the Kosses, because

section 1312(7)(A) does not describe an error that is caused by

or is the result of a determination.    O'Brien, 766 F.2d at 1043.

           Section 1312(7)(A) requires that the error described in

subparagraph (C) occur, not as a result of the determination, but

"in respect of any transaction on which such basis depends, or in

respect of any transaction which was erroneously treated as

affecting such basis."   A "transaction on which . . . basis

depends" refers to "'the transaction in which the property was

acquired, and the basis of the property at the time of

disposition can be said to depend on [or is determined by] such

transaction.'"   O'Brien, 766 F.2d at 1043 n.5 (quoting United

States v. Rushlight, 291 F.2d 508, 517 (9th Cir. 1961)).

           In O'Brien, 766 F.2d 1038, the Court of Appeals for the

Seventh Circuit faced similar issues.   There, the taxpayer

received shares of stock as a gift made in contemplation of

death.   The relevant estate filed an estate tax return in 1974

that valued the stock at about $215 per share.   The IRS

challenged this valuation, and the matter was litigated in the

Tax Court.   In 1975, the corporation at issue was liquidated, and

the taxpayer reported the resulting capital gain on his 1975

federal income tax return predicated on a basis of $215 per

share.   The IRS did not dispute this 1975 return.    In 1980, the

Tax Court finally entered a stipulated order setting the value of

                                12
the stock at about $280 per share at the time of the original

owner's death.   In 1981, the taxpayer filed a refund claim for

the overpayment of capital gains tax that was based on the lower

basis figure, but the IRS denied the claim as untimely because

more than three years had passed since the filing of the 1975

return and more than two years had passed since the taxpayer had

paid the tax which he sought refunded.   The taxpayer then filed a

refund action in the district court and attempted to invoke the

mitigation provisions involved in this case to avoid the statute

of limitations bar.   The Court of Appeals for the Seventh Circuit

held that the mitigation provisions did not apply.   Specifically,

the court held that the error of overpayment of capital gains tax

was not "in respect of" the transaction, which was the transfer

of the shares by the taxpayer's father and his subsequent death.

Id. at 1043.   The court explained that this error occurred "'in

respect of' the 1975 liquidation transaction and did not occur

'in respect of' the [father's] transfer and subsequent death."

Id.

          As the government points out, the error alleged here,

the nonrecognition of loss resulting from the worthlessness of

the stock in 1977, similarly was not "in respect of any

transaction on which such basis depends."   26 U.S.C. §1312(7)(A).

The basis of the shares in the determination depended on the

transaction in which David Koss acquired them in 1974.    The basis

of the shares did not depend on their becoming worthless in 1977.

Thus, the error in failing to recognize the shares' loss in value

                                13
did not occur "in respect of" their acquisition by David Koss in

1974.

            The Kosses further argue that because the shares

eventually became worthless, the basis of the shares also had to

be adjusted downward according to 26 U.S.C. § 1016(a)(1) and,

therefore, the loss of the value of the shares in 1977 was a

transaction on which the basis of the property depended.    Reply

Br. at 7.   We cannot accept this analysis, however, because it

ignores the first part of section 1312(7)(A):
          The determination determines the basis of
          property, and in respect of any transaction
          on which such basis depends, . . . there
          occurred . . . any of the errors . . . .

26 U.S.C. § 1312(7)(A) (emphasis added).    The determination did

not purport to ascertain the basis of the shares for all time. It

only sought to determine the basis of the shares in 1974 so that

the Kosses' taxable income and tax liability for 1974 could be

determined.    Clearly, the basis of the shares in 1974 depends

only on their value at the acquisition by the Kosses and not on

the shares' subsequent loss in value in 1977.    In addition, while

the Kosses allege that they "reduced the basis of the Video stock

in 1977 by $4,400," reply br. at 7, as required by Section

1016(a)(1), it is not clear that they did so, for they did not

deduct this loss on the 1977 return, and section 1016(a)(1)

refers only to a reduction in basis for losses "for which

deductions have been taken by the taxpayer in determining taxable

income for the taxable year or prior taxable years."    26 U.S.C.

§1016(a)(1).

                                 14
           Finally, even if the Kosses' claim could satisfy the

general rule of section 1311(a), they fail to meet the additional

"[c]onditions necessary for adjustment" listed in section

1311(b).   Only the condition in section 1311(b)(1) is arguably

applicable in this case:
          (1) Maintenance of an inconsistent position.
          -- Except in cases described in paragraphs
          (3)(B) and (4) of section 1312, an adjustment
          shall be made under this part only if --

                (A) in case the amount of the adjustment
           would be credited or refunded in the same
           manner as an overpayment under section 1314,
           there is adopted in the determination a
           position maintained by the Secretary, or

                (B) in case the amount of the adjustment
           would be assessed and collected in the same
           manner as a deficiency under section 1314,
           there is adopted in the determination a
           position maintained by the taxpayer with
           respect to whom the determination is made,

           and the position maintained by the Secretary
           in the case described in subparagraph (A) or
           maintained by the taxpayer in the case
           described in subparagraph (B) is inconsistent
           with the erroneous inclusion, exclusion,
           omission, allowance, disallowance,
           recognition, or nonrecognition, as the case
           may be.

26 U.S.C. § 1311(b)(1).   This condition is the heart of the

mitigation provisions and serves to limit their application

mostly to cases in which inconsistent tax treatment results in

harsh results that cannot be rectified due to the expiration of

the limitations period.   See O'Brien, 766 F.2d at 1041.

           The Kosses assert that the IRS maintained inconsistent

positions by arguing in its deficiency assertion, filed in 1980

                                15
and conclusively determined in 1990, that the basis of the shares

in 1974 was $110,000 while also accepting the Kosses' 1977 return

(filed in 1978) which did not declare a loss of the $110,000.       We

do not view these acts of the IRS as inconsistent.     Although it

may be true that the Kosses could not have known when filing

their 1977 return that the shares were originally worth $110,000,

and that they therefore had lost $110,000 in value, the fact

remains that they did not declare a loss at all in their 1977

return.   Consequently, the IRS accepted their 1977 return without

notice that the shares were worthless.     Surely, the IRS is not

required to verify the value of the capital assets of all

taxpayers each year to make sure they have not become worthless.

Thus, its acceptance of the 1977 return that did not declare such

a loss, at whatever value, is not inconsistent with its

successful position in Tax Court that the shares had a basis of

$110,000 to the Kosses in 1974.

             The Kosses are correct in arguing that section

1311(b)(1) does not require the taxpayer to disclose the loss or

the reason for the nonrecognition of loss in the return for the

year of the error.    Br. at 14.   This claim, however, is not the

issue.    The issue is whether the IRS maintained inconsistent

positions.    The answer is that the IRS could not have maintained

inconsistent positions because when the Kosses filed their 1977

return they did not declare that the shares became worthless in

that year and, thus, they did not put the IRS on notice of that

fact.    If the shares had not been worthless in 1977, the Kosses
would not have been allowed to recognize in their 1977 return any

                                   16
loss or gain in value of the shares unless they disposed of them.

Had they done so, their 1977 return would have been the same as

the one they actually filed.

          In sum, the Kosses' claims are barred either by the

statute of limitations or by their failure to pay the full

assessed tax, and the mitigation provisions regretfully offer

them no relief.   These claims were thus not within the district

court's jurisdiction and were dismissed properly.
                     C.   Equitable Recoupment

           The Kosses also brought a claim for equitable

recoupment to offset the loss in the value of the shares.    The

district court concluded that it also did not have jurisdiction

to entertain the equitable recoupment claim because it did not

have jurisdiction over the other time-barred claims.    Koss v.

United States, No. 93-6965, slip op. at 5 (E.D. Pa. Dec. 21,

1994).   Under United States v. Dalm, 494 U.S. at 608-10, 110

S.Ct. at 1368-69, equitable recoupment cannot be the sole basis

of jurisdiction over claims for tax credit or refund.   Thus, a

court can consider an equitable recoupment claim only if it has

jurisdiction on other grounds.

          On appeal, the Kosses argue that although the 1977 tax

year may be closed irrevocably due to the statute of limitations,

the 1974 tax year, which was before the Tax Court, remains open

and thus could be under the jurisdiction of the district court

for purposes of equitable recoupment.   Br. at 18.   To that end,

the Kosses state that they are not seeking here "to revive an

untimely affirmative refund claim," but "to offset a timely claim

                                 17
of the [IRS] for tax assessed" for the year 1974 relating to the

stock.   Br. at 19.    But, as we discussed above, the Kosses'

resort to the Tax Court deprived the district court of

jurisdiction over the 1974 tax year.     Thus, even if the 1974 tax

year remained open, it would be open only for the Tax Court and

not for the district court or any other court.

                           III.   CONCLUSION

          We cannot close this opinion without making an

additional observation.     It is, of course, commonplace to note

that the Internal Revenue Code is remarkably complicated.       In

this case, these complications have cost the Kosses dearly.

Indeed, at oral argument we were told that their debt to the IRS

now exceeds $300,000 because of the inclusion of interest.       Yet

it is very possible that, but for the operation of the non-

substantive, highly technical procedural provisions that have

been applied, they would not owe this money.     We are disturbed by

the harsh result.     Perhaps the Kosses, under the unusually

oppressive circumstances here, still may obtain administrative

relief from the IRS, or some other authority.     However, we have

no alternative and are constrained to affirm the final judgment

of the district court of December 21, 1994.

                                   18