Tax Court Memo Opinion Denying Refund under § 6512 Offers Excellent Examination Question for Tax Procedure Class (12/13/24)

In Applegarth v. Commissioner, T.C. Memo. 2024-107, GS here and T.C. Dkt Sheet here at entry # 68, the Court decided that although Applegarth overpaid his tax liabilities for the years, the Tax Court could not order the refund under its authority for ordering refunds, § 6512, because applicable time limits were not met and there is no equitable tolling for these time limits. These are familiar issues in tax procedure, with varying results depending upon the particular time limits involved. Readers of this blog and fans of tax procedure already know the issues involved, although the results may vary. More importantly, from my perspective as an old tax procedure professor, the case presents the classic type of case that would frame the examinations I liked to give tax procedure students. I will address the teaching “lessons” at the end of the blog entry, but first I will go through the facts and resolution of the issues as presented in the case.

The facts are simple, at least relatively so for tax procedure cases. I copy and paste the FINDINGS OF FACT section (Slip Op. 3-4, footnote omitted): 

          Applegarth resided in Florida when he filed the Petitions in these cases.

          On April 15, 2015, the IRS granted Applegarth an extension to file his 2014 income tax return until October 15, 2015.

          On April 15, 2016, the IRS granted Applegarth an extension to file his 2015 income tax return until October 15, 2016.

          Over several years, beginning in 2014, Applegarth made payments towards his 2014 and 2015 tax obligations. He made all the payments either on or before the extended filing deadlines for the respective tax years.

          On June 24, 2019, Applegarth filed his 2014 tax return.

          On November 21, 2019, the IRS mailed the Notice of Deficiency to Applegarth.

          In March 2022 Applegarth sent an unsigned 2015 Form 1040, U.S. Individual Income Tax Return, to IRS counsel.

[*4]

Timeline of Events — 2014 Tax Year

Date	Description
Apr. 15, 2014	Applegarth made a payment of $49,000 for the 2014 tax year.
Apr. 19, 2014	Applegarth made a payment of $4,500 for the 2014 tax year.
Jan. 17, 2015	Applegarth made a payment of $19,500 for the 2014 tax year.
Oct. 15, 2015	Extended deadline for Applegarth to file 2014 tax return.
June 24, 2019	Applegarth filed his 2014 tax return alleging an overpayment for the year.
Nov. 21, 2019	IRS issued Notice of Deficiency for tax years 2014 and 2015.
Feb. 18, 2020	Applegarth timely filed Petition with Tax Court.

The timeline of events regarding Applegarth's 2015 income tax is as follows:

Date	Description
Apr. 27, 2015	Applegarth made a payment of $9,000 for the 2015 tax year.
Sept. 18, 2015	Applegarth made a payment of $10,000 for the 2015 tax year.
April 15, 2016	Applegarth made a $10,000 payment for the 2015 tax year.
Oct. 15, 2016	Extended deadline for Applegarth to file 2015 tax return.
Nov. 21, 2019	IRS issued Notice of Deficiency for tax years 2014 and 2015.
Feb. 27, 2020	Applegarth timely filed Petition with Tax Court.
Mar. 2022	Applegarth sent his 2015 Form 1040 to IRS counsel alleging that he had an overpayment for the year.

On June 23, 2023, the parties stipulated the following: There is an income tax deficiency of $4,465 and an overpayment of $78,472 for Applegarth's 2014 tax year; there is an income tax deficiency of $25,576 and an overpayment of $9,603 for Applegarth's 2015 tax year; and Applegarth is not liable for additions to tax for the 2015 tax year under sections 6651(a)(1) or (2) or 6654. 

[END OF FINDINGS OF FACT]

Now, with those facts, the Court (Senior Judge Morrison, bio here), helpfully for readers, lists the Code sections that are involved in resolving the issue of whether the Tax Court has authority to order refunds (Slip Op. 5):

• section 6511(a), (b), and (h);

• 28 U.S.C. § 1491(a)(1);

• 28 U.S.C. § 1346(a)(1);

• section 7422(a);

• section 6532(a)(1);

• section 6512(a); and

• section 6512(b)(1) and (3).

Students and practitioners of tax procedure encounter these Code (both Titles 26 and 28) sections often and likely are already generally familiar with them. Ultimately, the case turns on § 6512 (cited 52 times from page 5 to page 20 according to the Google Chrome find feature), but the other sections require some time in the sun as do leading tax cases (chronological order) Commissioner v. Lundy, 516 U.S. 235, 240-241 (1996); United States v. Brockamp, 519 U.S. 347 (1997) and Boechler, P.C. v. Commissioner, 596 U. S. 199 (2022), with even nontax leading cases "Dobbs v. Jackson Women’s Health Organization, 597 U.S. ___, 142 S.Ct. 2228 (2022)(overturning the Supreme Court’s prior decisions in support of abortion rights of Roe v. Wade, 410 U.S. 113 (1973) and Planned Parenthood of Southeastern Pa., v. Casey, 505 U.S. 833 (1992)." Because this is a blog principally for students of tax procedure (even if also practitioners), I will leave to readers the discipline to work their way through the opinion and the statutes. (Busy students or practitioners with good case recall may forego reading the cases, but I strongly encourage them to re-read the Code Sections.*)

BACK TO TEACHING

On the page to the right titled “Federal Tax Procedure Book (2024 Editions) (7/25/24; 7/27/24),” I offer my prior examinations under the heading “FORMS AND MATERIALS FOR USE WITH THE BOOK.” Those interested might check out the Fall 2015 Examination, here, which is presented with a table of key dates similar to the way Judge Morrison offers key dates in Applegarth. After presenting the facts (most of which are relevant facts), I ask the students to provide specific answers as they step through the facts and law, much like Judge Morrison does in his analysis getting to the bottom line conclusions for the two years.

If I were still teaching, I would either or both (i) include Applegate as assigned reading and (ii) frame a question with subquestions in the format for the Fall 2015 Examination. The beauty of this format for questions is that finite determinable answers (e.g., what is the original due date of the return?) can be given without the indeterminacy (and thus subjectivity in grading) that often attends essay-type questions. And, depending what the student chooses to say about even a wrong answer, I might be able to give some credit. That’s my story; I am sticking to it!

Enjoy!

* War story from law school. My first tax class (2 semester basic income tax) at UVA Law School was taught by Edward S. Cohen, a true giant in the tax law (and in anything else he endeavored). (See his Wikipedia page here.) He was in the highest quality law firms and at leading tax positions in government. He cautioned students to read Code sections often, even those we thought we knew. He said that, while in private practice, if he received an inquiry from a CEO of a company as to whether the CEO's compensation in the form of salary was taxable, he would advise the CEO that he would have to check the relevant Code sections and get back to him (billing him, of course, for the time to read the Code sections).