Revah v. Commissioner ( 2014 )

FILED
NOT FOR PUBLICATION SEP 17 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
HAIM REVAH and LUCINDA REVAH, No. 11-70211
Petitioners - Appellants, Tax Ct. No. 23331-08L
v.
MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,
Respondent - Appellee.
Appeal from a Decision of the
United States Tax Court
Argued and Submitted April 9, 2014
Pasadena, California
Before: THOMAS, M. SMITH, and CHRISTEN, Circuit Judges.
Haim and Lucinda Revah appeal from the decision of the tax court
concluding that equitable recoupment does not apply to offset their income tax
liabilities, and upholding the determination of the Internal Revenue Office of
Appeals to proceed with the collection of such liabilities. Because the parties are
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
familiar with the facts and procedural history of this case, we repeat only those
facts necessary to resolve the issues raised on appeal. We reverse and remand.
A party seeking equitable recoupment must demonstrate that: (1) the “same
transaction, item, or taxable event” is subject to two taxes; (2) the taxes are
“inconsistent in that the Tax Code authorizes only a single tax”; (3) the tax sought
to be recouped is time barred; (4) there is an “identity of interest between the
parties paying the duplicative tax”; and (5) “the court in which the recoupment
claim is brought must independently have jurisdiction to adjudicate the claim.”
Estate of Branson v. Comm’r, 264 F.3d 904, 909–10 (9th Cir. 2001) (internal
quotations omitted).
The tax court concluded that the Revahs could not demonstrate that the
Internal Revenue Service applied two inconsistent taxes. The tax court reasoned
that the Revahs’ inability to use net operating losses to reduce tax liabilities was
the result of their failure to make their refund claims within the proper time period,
rather than the result of inconsistent theories of taxation.
The tax court’s conclusion that the Revahs are not entitled to equitable
recoupment due to their failure to timely file is erroneous. In United States v.
Bowcut, we rejected the government’s argument that recoupment should not be
permitted because the situation from which relief was sought was created by the
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taxpayer’s untimely refund claim. 287 F.2d 654, 657 (9th Cir. 1961); see also
Branson, 264 F.3d at 918 (citing Bowcut to reject government’s argument that
petitioner was not entitled to equitable recoupment because she did not diligently
pursue her refund claim). Rather, both Bowcut and Branson concluded that
equitable recoupment was available even though the claims at issue were not
timely filed. Branson, 264 F.3d at 918; Bowcut, 287 F.2d at 657.
Therefore, even though the Revahs failed to timely file their refund claims,
their untimeliness is not a ground upon which the tax court may deny equitable
recoupment. See Branson, 264 F.3d at 918; Bowcut, 287 F.2d at 657. The tax
court thus erroneously concluded that the Revahs’ failure to timely assert their
refund claims precluded them from satisfying the equitable recoupment
requirement that the taxes be inconsistent. Accordingly, we reverse and remand
for further proceedings consistent with this memorandum disposition.
REVERSED AND REMANDED.
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