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.

Ninth Circuit Denies Taxpayers a Refund for Failure to Satisfy § 6511 Timing Rules (8/15/24)

In Libitzky v. United States, 110 F.4th 1166 (9th Cir. 2024), CA9 here & GS here, the panel rejected the Libitzkys’ refund suit for failure to meet the refund suit limitations periods in § 6511, here. Many readers of this blog will likely already have some familiarity with the time limitations for refund suits and know that application of the time limitations can be complex. I cover the subject in the Federal Tax Procedure (2024 Practitioner Ed.), pp. 226-230 and Federal Tax Procedure (2024 Student Ed.), pp. 157-161, available free here. The only difference between the Practitioner Edition and the Student Edition is the former has footnotes and the latter does not. I have made significant revisions to these pages in my 2025 Working Draft (to be published in July or August 2025), particularly adding Example 8a inspired by Libitzky. The revisions as of the posting of this blog are in redline format here (Practitioner Edition). (Please note that a number of changes are nonsubstantive, such as changing April 15 of Year 02 to 4/15/02.

I have had considerable difficulty understanding the Libitzky opinion. The discussion I present here will likely reflect the difficulty. So, I have decided to first cover the applicable “law” as I understand it. I will then state key representative “facts” of Libitzky through Example 8a. That is the approach I take in the Book—to first present the law and then present various fact scenarios (Examples to discuss the complexities in the law). In presenting the law, I will copy and paste from the 2025 Practitioner Edition working draft retaining the redlines showing changes from the 2024 editions. I include only the portion related to Libitzky. I only include footnotes where they are needed for the discussion of Libitzky. (The numbering of the footnotes are not the same as in the Book.)

          There are two statutes of limitation on taxpayers claiming tax refunds.

          First, there is a statute of limitations for filing the claim for refund. A claim for refund must be filed within three years from the date the return was filed or two years from the date the tax was paid, whichever is later, and, if no return is filed, within two years from the date of payment. § 6511(a). This is sometimes called the refund claim limitation period. This statute of limitations has traditionally been read literally, requiring filing within the stated periods with no equitable relief; so read literally, the statute of limitations is said to be jurisdictional for the predicate condition in § 7422(a) to file a suit for refund. Also, if read literally, the statute means that a taxpayer can file a return claiming a refund 40 years late and qualify under this first rule. I hope readers will instinctively say something must be missing here, for statutes of limitations do not normally allow such lengthy lapses before the claim must be pursued. The answer to that concern is in the second rule, a limitation on the amount of tax that can be refunded. n1  

    n1 Omohundro v. United States, 300 F.3d 1065, 1068-1069 (9th Cir. 2002)); Weisbart v. Treasury, (2d Cir. 2000); and Rev. Rul. 76-511, 1976-2 C.B. 428. The 40 years late example is inspired by Oropallo v. United States, 994 F.2d 25, 30 (1st Cir. 1993) (noting that the limitation might be “illusory” for late filed returns because a taxpayer could “file a tax return 40 years late and still have 3 additional years in which to file a claim for refund;” the Second Circuit in Weisbart said that “Nevertheless” this construction makes sense, noting that the purpose of § 6511(a) “is not to bar stale refund claims, but to ensure that a taxpayer give the IRS notice of such claims before suing in federal court.”) But see Libitzky v. United States, 110 F.4th 1166, 1172 (9th Cir. 2024) (stating that “both the limitation period [in § 6511(a) and the look-back period in § 6511(b) (discussed immediately below the text above)] are shorter and less generous for taxpayers who do not timely file their tax returns.” (Bold-face supplied by JAT)). In other words, the Libitzky Court would not accept the conclusion that a refund claim return filed, say, 4 or 40 years after the return due date (meaning that the return is not timely filed) can avoid the two-year limitations period in § 6511(a). My concern with that notion is the limitations periods in § 6511(a) are whichever is later which, as I read the syntax of § 6511(a) would permit the return claiming a refund filed after the two year period to qualify under the first rule (3-years from the time the return was filed), thus mooting the applicability of the 2-year period in § 6511(a). For reasons that I note below, however, Libitzky may have been correct under § 6511(b) because of its distinction between a refund claim and a filed return. See below Example 8a on p. 233.