Edward Turney Savage v. Commissioner

112 T.C. No. 5
UNITED STATES TAX COURT
EDWARD TURNEY SAVAGE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3387-98. Filed February 16, 1999.
P claimed a $10,131 overpayment on his return for
1993. R applied all of the overpayment to P's assessed
tax liabilities for 1990 and 1991. Thereafter, R
determined that P was liable for a $5,926 deficiency
for 1993. P concedes the deficiency and does not now
claim an overpayment for 1993. P claims that R
improperly determined P's tax liabilities for 1990 and
1991. Held: This Court does not have jurisdiction to
decide whether R properly determined the assessed
liabilities for years not before the Court.
Edward Turney Savage, pro se.
Daniel A. Rosen, for respondent.
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COHEN, Chief Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(3) of the Internal Revenue Code of 1986, as amended, and
Rules 180, 181, and 182.1 The Court agrees with and adopts the
Opinion of the Special Trial Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: Respondent determined a
deficiency in petitioner's Federal income tax for the taxable
year 1993 in the amount of $5,926.
After concessions by petitioner, the only issue for decision
is whether this Court has jurisdiction to decide whether
respondent properly applied an overpayment of tax for 1993, the
taxable year in issue, to assessed liabilities for taxable years
not in issue in this case. We hold that this Court does not have
jurisdiction to decide this matter.
FINDINGS OF FACT
Some of the facts have been stipulated, and they are so
found. Petitioner resided in New York, New York, at the time
that his petition was filed with the Court.
Petitioner made three estimated tax payments for 1993, the
taxable year in issue, in the total amount of $31,000.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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Thereafter, on April 15, 1994, petitioner requested an extension
of time to file his 1993 return, which request was granted.
Petitioner made an additional $7,000 payment with that request.
Thus, petitioner made payments for 1993 in the total amount of
$38,000.
Petitioner filed his 1993 return on April 28, 1997, and
reported tax thereon in the amount of $27,869. Based on his
reported tax and his total payments, petitioner claimed an
overpayment for 1993 in the amount of $10,131 (i.e., $38,000 -
$27,869). Respondent applied the $10,131 overpayment to
petitioner's assessed tax liabilities for 1990 and 1991 as
follows:
Year Amount Applied
1990 $3,081.54
1991 7,049.46
Total 10,131.00
Petitioner's assessed tax liabilities for 1990 and 1991 included
interest and penalties.
On November 20, 1997, respondent issued a notice of
deficiency to petitioner. In the notice, respondent determined a
deficiency in petitioner's income tax for 1993 in the amount of
$5,926. Thereafter, petitioner filed a timely petition with this
Court.
Prior to trial, petitioner conceded the deficiency
determined by respondent in the notice of deficiency, and the
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parties filed a stipulation of settled issues to that effect.
Petitioner also concedes that respondent was authorized to apply
the $10,131 overpayment that petitioner claimed on his 1993
return to his 1990 and 1991 taxable years. Petitioner contends
that respondent improperly determined petitioner's tax
liabilities--specifically interest and penalties--for 1990 and
1991. Thus, according to petitioner, some portion of the $10,131
overpayment is now available as an offset against the agreed
deficiency for 1993.
OPINION
This Court is a court of limited jurisdiction; accordingly,
we may only exercise jurisdiction to the extent expressly
permitted or provided by statute. Henry Randolph Consulting v.
Commissioner, 112 T.C. ___, ___ (1999) (slip op. at 6); Trost v.
Commissioner, 95 T.C. 560, 565 (1990); Judge v. Commissioner, 88
T.C. 1175, 1180-1181 (1987). Thus, we have jurisdiction to
redetermine a deficiency if a valid notice of deficiency is
issued by the Commissioner and if a timely petition is filed by
the taxpayer. Rule 13(a), (c); Monge v. Commissioner, 93 T.C.
22, 27 (1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147
(1988). Insofar as our jurisdiction regarding overpayments is
concerned, section 6512(b)(1) provides:
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, * * * or finds
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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 * * *.
See Winn-Dixie Stores, Inc. v. Commissioner, 110 T.C. 291, 295
(1998).
Because respondent issued a valid notice of deficiency and
petitioner filed a timely petition, we have jurisdiction to
redetermine the deficiency or to determine an overpayment for the
year in issue. However, petitioner concedes the deficiency, and
he does not now claim an overpayment for the year in issue.
Rather, petitioner contends that respondent improperly determined
petitioner's assessed liabilities for interest and penalties for
1990 and 1991 and that, as a consequence, some portion of the
$10,131 overpayment that petitioner claimed on his 1993 return is
now available as an offset against the agreed deficiency for
1993. We hold, however, that we lack jurisdiction in this
proceeding to review respondent's assessment of petitioner's
liabilities for interest and penalties for 1990 and 1991.
Our analysis begins with section 6402. Under the general
rule of that section, the Commissioner is expressly authorized to
credit the amount of an overpayment against any tax liability of
the taxpayer. Sec. 6402(a). However, after applying an
overpayment against the taxpayer's liability for another taxable
year, the Commissioner is not precluded from subsequently
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determining a deficiency for the taxable year in respect of which
the overpayment was originally claimed and allowed. Terry v.
Commissioner, 91 T.C. 85, 87 (1988).
Section 6512(b) defines this Court's jurisdiction to
determine overpayments. Paragraph (4) of such section serves to
deny jurisdiction to the Court "to restrain or review any credit
or reduction made by the Secretary under section 6402." Sec.
6512(b)(4).2
Pursuant to the authority conferred by section 6402(a),
respondent credited the $10,131 overpayment claimed by petitioner
on his 1993 return against his assessed tax liabilities,
including interest and penalties, for 1990 and 1991. Petitioner
contends that his liabilities for interest and penalties for 1990
and 1991 were improperly determined by respondent. However,
section 6512(b)(4) clearly restricts our jurisdiction to decide
that matter.
Our holding in this case is supported by an opinion of the
Court of Appeals for the Second Circuit, the circuit to which
this case is appealable, that predates the enactment of section
6512(b)(4). See Belloff v. Commissioner, 996 F.2d 607 (2d Cir.
2
Sec. 6512(b)(4) was added to the Code by the Taxpayer
Relief Act of 1997 (TRA 1997), Pub. L. 105-34, sec. 1451(b), 111
Stat. 788, 1054. Sec. 6512(b)(4) became effective on Aug. 5,
1997, see TRA 1997, sec. 1451(c), 111 Stat. 1054, and is
therefore applicable in this case.
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1993). In that case, the Court of Appeals for the Second Circuit
indicated that a procedurally valid assessment for a year not
before the Tax Court generally provides a proper basis for the
application of a tax overpayment and precludes jurisdiction by
the Tax Court to decide the merits of the assessment. Id. at
616-617; see also Moretti v. Commissioner, 77 F.3d 637, 642 (2d
Cir. 1996). In the case before us, petitioner does not contest
the timeliness or validity of the assessments for 1990 and 1991
as a procedural matter. Petitioner seeks rather to have this
Court decide the merits of those assessments. Even the Court of
Appeals' opinion in Belloff, which predates section 6412(b)(4),
indicates that we lack jurisdiction to review that matter.
The present case is distinguishable from Winn-Dixie Stores,
Inc. v. Commissioner, supra. In that case, the taxpayer had
agreed to the Commissioner's determination for certain years
before the Court (the present years' underpayments). The
Commissioner and the taxpayer had also agreed as to the
overpayments for certain years not before the Court (the prior
years' overpayments). The taxpayer requested that the
Commissioner offset the prior years' overpayments against the
present years' underpayments. However, the Commissioner refunded
the prior years' overpayments, including interest thereon
calculated at the overpayment rate under section 6621(a)(1), to
the taxpayer. The Commissioner later mailed notices of tax due,
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including interest calculated at the underpayment rate under
section 6621(a)(2) and (c), for the present years' underpayments.
The taxpayer paid the present years' underpayments, together with
interest at the underpayment rate. The taxpayer then claimed
that the Commissioner's failure to offset pursuant to section
6402(a) caused the taxpayer to overpay interest for years before
the Court (the present years' overpayments).
The issue in Winn-Dixie Stores, Inc. was whether the
Commissioner abused his authority by failing to offset the prior
years' overpayments against the present years' underpayments.
The Commissioner argued that pursuant to section 6512(b)(4) this
Court did not have jurisdiction to decide that matter.
We agreed that pursuant to section 6512(b)(4) this Court did
not have authority to restrain or review any credit or reduction
made by the Commissioner under section 6402. However, we held
that under the facts of Winn-Dixie Stores, Inc. v. Commissioner,
110 T.C. at 294, we were not "being asked to restrain or review a
reduction of a refund under section 6402." The overpayments for
prior years had been refunded in full to the taxpayer, rather
than being reduced through application as a credit against
another year's tax. We held that the Commissioner's
determination regarding whether to offset the prior years'
overpayments against the present years' underpayments affected
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the interest due on the present years' underpayments.3 We held
that we had jurisdiction to review the taxpayer's claim of an
overpayment of interest on underpayments for years before the
Court and that our jurisdiction to decide the matter was not
restricted under section 6512(b)(4).
In the case before us, petitioner does not contest
respondent's determination, including the proposed interest
calculation on the deficiency, for the year in issue. Unlike
Winn-Dixie Stores, Inc. v. Commissioner, supra, to the extent
petitioner reported an overpayment, respondent exercised his
discretion under section 6402 to offset such overpayment against
petitioner's assessed liabilities for 1990 and 1991. In this
regard, petitioner contends only that respondent improperly
determined petitioner's liabilities for interest and penalties
for 1990 and 1991 and that, as a consequence, some portion of the
$10,131 overpayment that he claimed on his 1993 return is
available as an offset against the agreed deficiency for 1993.
However, were we to address petitioner's contention on the merits
3
Interest on the present years' underpayments was affected
because there is no net interest due for the period of mutual
indebtedness if the Commissioner exercises his authority to
offset under sec. 6402(a). See sec. 6601(f). However, there is
net interest due if there is no offset. Net interest results in
this instance because the rate for calculating interest on
overpayments is less than the rate for calculating interest on
underpayments. See sec. 6621(a).
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we would effectively be reviewing the credit made by respondent
under section 6402. This we may not do.4 Sec. 6512(b)(4).
To reflect our disposition of the disputed issue, as well as
the parties' stipulation of settled issues,
Decision will be entered
for respondent.
4
If petitioner has in fact overpaid his liabilities for
1990 and 1991, he may have a remedy in another forum as to those
years. Thus, if applicable limitations periods remain open,
petitioner may file a claim for refund for 1990 and 1991 with the
Internal Revenue Service, and, if such claim is denied,
petitioner may be entitled to sue for a refund in the appropriate
Federal District Court or the U.S. Court of Federal Claims. See
McCormick v. Commissioner, 55 T.C. 138, 142 (1970).