Berry v. Commissioner

United States Tax Court
97 T.C. 339; 1991 U.S. Tax Ct. LEXIS 83; 97 T.C. No. 23 (1991)

ELI5:

Rule of Law:

An agreement to extend the time for the government to assess taxes, executed after the statutory period for filing a refund claim has already expired, does not revive the taxpayer's right to claim a refund for overpaid taxes. The amount of any allowable refund is strictly limited to taxes paid within the statutory look-back periods, which cannot be revived once they have lapsed.

Facts:

For the 1982 tax year, Jack and Crisa Berry had $9,700 in federal income taxes withheld from their wages.
The Berrys did not file a federal income tax return for the 1982 tax year by its due date, April 15, 1983.
Under I.R.C. § 6513(b)(1), their withheld 1982 taxes were deemed to have been paid on April 15, 1983.
On November 14, 1985, more than two years after their taxes were deemed paid, the Berrys and the Internal Revenue Service (IRS) executed a Form 872-A, an agreement to extend the time for the IRS to assess tax for the 1982 tax year.
The parties later stipulated that the Berrys' correct 1982 tax liability was only $3,906 plus a $195 penalty, which confirmed they had overpaid their 1982 taxes by $5,599 from their withholdings.

Procedural Posture:

On January 4, 1989, the Commissioner of Internal Revenue mailed statutory notices of deficiency to Jack and Crisa Berry for tax years 1982 through 1986.
The Berrys filed a petition with the U.S. Tax Court to contest the deficiencies.
On March 30, 1989, after filing their court petition, the Berrys submitted a late joint federal income tax return for the 1982 tax year.
The parties submitted the case fully stipulated to the U.S. Tax Court, agreeing on the relevant facts and asking the court to decide the legal issue of whether the Berrys were entitled to a refund for their 1982 overpayment.

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Issue:

Are taxpayers entitled to a refund for an overpayment of taxes for a year in which they did not file a tax return, when they executed an agreement to extend the time for tax assessment (Form 872-A) after the statutory period for filing a refund claim had already expired?

Opinions:

Majority - Parker, Judge

No. The taxpayers are not entitled to a refund because their claim is barred by the statute of limitations. The court's jurisdiction to order a credit or refund is strictly limited by I.R.C. § 6511 and § 6512. Since the Berrys did not file a 1982 tax return, the applicable period for filing a refund claim was two years from the time the tax was paid. Their taxes were deemed paid on April 15, 1983, meaning the period to claim a refund expired on April 15, 1985. The Form 872-A consent agreement, executed in November 1985, was signed after this limitations period had already expired and was therefore a 'legal nullity' that could not revive the time-barred claim. Furthermore, even if the agreement were considered valid, the look-back rules of § 6511(c) would limit any refund to taxes paid after the agreement's execution or within the two years prior, a period in which the Berrys paid no tax.

Analysis:

This case firmly establishes that an agreement to extend the assessment period under I.R.C. § 6501(c)(4) is ineffective to extend the refund period if executed after the refund statute of limitations has already expired. It highlights the unforgiving nature of statutory deadlines in tax law, serving as a critical reminder that failing to file a return can result in the permanent forfeiture of an overpayment. The decision distinguishes this scenario from cases where an extension is timely executed, thereby preserving the taxpayer's right to a refund, and solidifies the principle that the Commissioner lacks the authority to waive mandatory statutory refund deadlines.

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