I tried to develop a simplified set of facts that would illustrate the facts in the ILM but could not because there are some confusing dates which are identified by pseudonyms rather than actual dates. If I had the actual dates it would likely not be confusing. So, I will simply state the key legal propositions asserted in the ILM.
1. The normal statute of limitations is 3 years. Section 6501(a).With that background, the following legal analysis in the ILM is helpful.
2. The normal statute may be extended by agreement. Section 6501(c)(4). In this case it was by Form 872 Consent, which extends to a date stated.
3. In the case of an amended return filed within the 60 day window of the statute expiration date (whether the normal statute or the extended statute), the assessment date expires no later than 60 days after the amended returns. Thus, for example, say that the year 01 return was timely filed on 4/15/02 and the normal statute date is 4/15/05. If the taxpayer files an amended return on 4/1/05, the statute to assess the tax reported on the amended return does not expire before 5/31/05 (60 days after 4/1/05).
4. Tax actually collected by the IRS while the assessment statute is still open is not an overpayment even if the IRS does not assess the tax until after the statute expiration date. Thus, in the above example, assume that the same example, except that (i) the taxpayer sent a payment of $100,000 with the amended 01 return filed 4/1/05; (ii) the IRS posts the payment to the year 01 on 4/3/05; but (iii) the IRS does not assess until 9/1/05 (well after the period for assessment, even after the Section 6501(c)(7) 60 minimum extension). There is still no overpayment because the IRS timely collected the tax.