Ronald W. Stewart, Petitioner

• T.C. Memo. 1999-121 UNITED STATES TAX COURT RONALD W. STEWART, Petitioner y. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 23541-97.

Filed April 12, 1999.

Ronald W. Stewart, pro se.

John R. Gilbert, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

RUWE, Judge: Respondent determined deficiencies and additions to tax in petitioner's Federal income tax as follows:

Year 1992 1993 1994 1995 Deficiency $30,790 29,153 23,117 44,177 Additions to Tax Sec. 6651(a)(1) $2,345 2,686 1,061 4,809 Sec. 6654 $305

SERVED

Subsequent to the filing of his petition, petitioner filed delinquent Federal income tax returns for each of the years 1992 through 1995, inclusive.

Each of petitioner's returns was due on or before April 15, following the close of the calendar year.

Sec. 6072(a).1 The returns for each of the years 1992 through 1994, inclusive, claim credit for tax withheld from petitioner's wages and claim an overpayment of tax for those respective return years. Respondent accepted each of the returns as filed.

As a consequence of respondent's accepting the returns for 1992 through 1995, assessing the tax reported on the returns, and other concessions, petitioner overpaid tax for the years 1992, 1993, and 1994.

In respondent's post trial memorandum, he concedes an overpayment of $3,067 for 1992.

The amount of the overpayment ($3,067) is the sum of a $2,993 overpayment from 1996 and the $74 overpayment that petitioner claimed on his 1992 return.

The issues for decision are:

(1) Whether petitioner's overpayments of tax for the taxable years 1993 and 1994 are either partially or fully time barred under sections 6511(b) and 6512, and (2) whether petitioner is liable for an addition to tax under section 6651(a)(1) for the taxable year 1995.

1Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

FINDINGS OF FACT

Petitioner resided in Laurel Springs, New Jersey, at the time of filing his petition and amended petition with this Court.

After filing his petition in this case, petitioner filed delinquent Federal income tax returns for each of the years in issue.

The returns for 1992, 1993, 1994, and 1995 are dated January 15, 1998, January 31, 1998, February 7, 1998, and February 23, 1998, respectively.

No requests for extensions of time.to file were requested or granted.

Petitioner's 1992 and 1993 tax returns claim capital loss carryover deductions emanating from a nonbusiness bad debt incurred in 1990.

The capital loss carryovers claimed in 1992 and 1993 are $3,000 and $788,2 respectively. Petitioner's tax return for the 1994 year does not claim any capital loss arryforward. Petitioner's tax returns show tax liabilities in the following amounts:

1993 Years 1994 1995 Amount:

$15,594 $15,787 $25,113 Petitioner had taxes withheld from his wages for each of the years in issue.

The amounts withheld for the years 1993 through 1995 are as follows:

2All amounts have been rounded to the nearest dollar.

Amount withheld:

1993 Years 1994 1995 $18,457 $18,875 $24,943 Respondent issued notices of deficiency for the years 1994 and 1995 on September 17, 1997, and for the year 1993 on October 1, 1997.

OPINION

Our jurisdiction to determine an overpayment and order a refund is provided in section 65~_2.3 The Supreme Court has 3Sec. 6512(b) provides in relevant part:

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

there is no deficiency and further finds that the paragraph (3) and by section 7463, if the Tax Court that taxpayer has made an overpayment of taxable year * * * in respect of which the Secretary determined the deficiency, cr finds that there is a deficiency but that such tax, the amount of such overpayment, and such amount shall, when the decision of the Tax Court has become final, be credited or refunded to the taxpayer.

the Tax Court shall have jurisdiction to determine the taxpayer has made an overpayment of income tax for the same finds * * * * * * * (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-- (A) after the mailing of (B) within the period which would be applicable the notice of deficiency, under section 6511(b)(2), of the mailing of been filed (whether or not filed) stating the grounds upon which the Tax Court overpayment, or the notice of deficiency a claim had finds that there is an (d), if on the date (c), or (C) within the per_od which would be applicable (continued...)

recently interpreted this provision.

In Commissioner v. Lundy, 5'_6 U.S. 235 (1996), the Court stated:

The analysis dictated by section 6512(b)(3)(B) is * * * all that is that the "claim" contemplated in that not elegant, but it is straightforward. matters for the proper application of section 6512(b)(3)(B) section be treated as the only mechanism for determining whether a taxpayer can recover a refund. Section 6512(b)(3)(B) defines the look-back period that applies in Tax Court by incorporating the look-back provisions from section 6511(b)(2), and directs the Tax Court into the timeliness of a hypothetical claim for refund filed "on the date of the mailing of the notice of .deficiency."

to determine the applicable period by inquiring To this end, section 6512(b)(3)(B) directs the Tax See sections 6511(b)(2)(A) and to apply either a 3-year or a 2- (incorporating by reference section 6511(a)); Court's attention to section 6511(b)(2), which in turn instructs the court year look-back period. (B) To decide which of the Tax Court must consult section 6511(a) and ask whether the claim described by section 6512(b)(3)(B)--a claim filed "on the date of the mailing of the notice of deficiency"--would be filed "within 3 years from the time the return was filed." reference section 6511(a)).

these look-back periods to apply, the filing provisions of (incorporating by If a claim filed on the See section 6511(b)(2)(A) * * * 3(...continued) under section 6511(b)(2), any claim for refund filed within the applicable period specified in section 6511 and before the date of the mailing of the notice of deficiency-- in respect of (c), or (d), (i) which had not been disallowed before that date, (ii) which had been disallowed before that date and in respect of which a timely suit for refund could have been commenced as of that date, or (iii) in respect of which a suit for refund had been commenced before that date and within the period specified in section 6532.

.

then the look-back date of the mailing of the notice of deficiency would be filed within that .3-year period, period is also three years and the Tax Court has jurisdiction to award a refund of any taxes paid within three years prior to the date of the mailing of the notice of deficiency. 6512(b)(3)(B). that 3-year period, refund is only two years. 6512(b)(3)(B).

Secs. 6511(b)(2)(A) and If the claim would not be filed within then the period for awarding a Secs. 6511(b)(2)(B) and In this case, we must determine which.of these two look-back periods to apply when the taxpayer fails to file a tax return when it is due, and the Commissioner mails the taxpayer a notice of- deficiency before the taxpayer gets around to filing a late return. * * * .We think the proper application of section * 6512(b)(3)(B) period be applied. 242-243.]

* requires that a 2-year look-back [Commissioner v. Lundy, supra at * In 1993, petitioner had tax withheld from his wages in the total amount of $18,457.

This amount is deemed to have been paid on April 15, 1994.

Sec. 6513(a). Respondent has conceded that petitioner's tax liability is $15,594, the amount shown by petitioner on his 1993 return.

This results in an overpayment of $2,863. Most of this overpayment ($2,642) is time barred because the date on which the notice of deficiency was mailed, the hypothetical claim for refund, is more than 2 years from the date (April 15, 1994) the tax was deemed paid.

Secs. 6511(b)(2)(lB), 6512, 6513(a); Commissioner v. Lundy, supra; Galuska v.

Commissioner,

5 F.3d 195 (7th Cir. 1993), affg. 98 T.C. 661 (1992); Allen v. Commissioner,

The portion of tie claim attributable to a capital loss carryforward is not so låmited.

The amount of carryforward claimed in petitioner's 1993 r turn was $788.

The statute of limitations on a capital loss carryforward arising from a bad debt deduction is 7 years.

Sec.

6511(d)(1). Petitioner was in the 28 percent marginal tax bracket in 1993.

The maximum portion of an overpayment attributable to the capital loss carryforward ($788) would be $221.4 Consequently, we hold that petitioner is entitled to a refund for 1993 in the amount of·$221.

For 1994, respondent concedes that petitioner's tax liability is $15,787 as shown by petitioner on his delinquent return and that petitioner had tax withheld from his wages in the otal amount of $18,875.

This results in an overpayment of $3,088.

None of this amount is claimed to be related to a apital loss carryforward.

For the reasons stated above, the tax ithheld is deemed to have been paid on April 15, 1995, and the ypothetical claim for refund was made on September 17, 1997.

.

The hypothetical claim for refund, having been m'ade more than 2 years from the date the tax was deemed paid, is time barred by virtue of sections 6511(b) (2) (B) and 6512. Commissioner v..

4The amount of the overpayment attributable to the capital loss carryforward is the product of the full amount of the loss carryforward times petitioner's marginal rate; $221. Respondent agrees that petitioner is entitled to an overpayment of $221 for 1993.

i.e., $788 x .28 = Lundy, supra; Galuska v. Commissioner, supra; Allen v.

Commissioner, supra.

For 1995, respondent concedes petitioner's tax liability is $25,113, the amount shown by petitioner on his return for that year.

The parties agree that the total amount petitioner had withheld from his wages was $24,943. Petitioner's income tax deficiency for 1995 is $170.

Respondent determined that petitioner is liable for an addition to tax under section 6651(a)(1) for failure to file a timely return for 1995. Generally, individual income tax returns must be filed on or before the 15th day of April following the .

.

close of the calendar year.

Sec. 6072(a).

Section 6651(a)(1) provides for an addition to tax for failure to file a timely return.

The addition to tax is equal to 5 percent of the amount required to be.shown as tax on the return, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.

A taxpayer may avoid the addition to tax by establishing that the failure to file a timely return was due to reasonable cause and not willful neglect. Rule 142(a); United States v.

Boyle, 469 U.S. 241, 245-246 (1985). Petitioner presented no evidence as to the cause for the late filing.

In the absence of a satisfactory explanation for the failure to file a timely return, we cannot conclude that the failure was due to a reasonable cause. Consequently, we uphold respondent's determination that petitioner is liable for an addition to tax for the 1995 taxable year pursuant to section 6651(a) (1).

To reflect the foregoing, .

Decision will be entered under Rule 155.

99. T.C. 475 (1992), affd. without published opinion 23 F.3d 406 (6th Cir. 1994).