Rosenberg v. Commissioner

OPINION

PANUTHOS, Special Trial Judge¹: This case is before the Court on respondent's Motion for Partial Summary Judgment filed pursuant to Rule 121. ² By his motion, ³ respondent seeks a determination that this Court does not have jurisdiction to consider petitioners' contention that the deficiency determined against them should *116 be credited to the extent of refund checks issued by respondent but not received by petitioners. For each of the years at issue petitioners claim that any refund check issued to them was cashed over their forged endorsements by their former attorney, Charles Berg.

Respondent issued a statutory notice of deficiency on September 21, 1982. The notice determined deficiencies against petitioners as follows:

In his notice *117 of deficiency respondent determined that petitioners were not entitled to claimed investment credits and losses generated by a limited partnership known as Vinque. The limited partnership was created to acquire and distribute master recordings.

Petitioners' tax returns for the years 1978 and 1979 were prepared by Berg, or persons connected with his office, and the address shown on the form was attorney Charles Berg's address. The Application for Tenative Refund (Form 1045) sought to carryback unused investment credits from the year 1979 to the years 1975, 1976, and 1977. The 1978 and 1979 Federal income tax returns claimed losses from Vinque. Thus, petitioners claimed overpayments for which respondent issued refund checks. Petitioners never received some or all of the refund checks which they expected as a result of their participation in the limited partnership. Petitioners claim that Berg received the proceeds of the refund checks. ⁴

Rule 121 provides that a party may move for summary judgment upon all or any *118 part of the legal issues in controversy so long as there is no genuine issue of material fact. Rule 121(b) provides that "a decision shall * * * be rendered if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials * * * show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." The Rule further provides that "partial summary adjudication may be made which does not dispose of all issues in the case." Elkins v. Commissioner,81 T.C. 669, 674 (1983). The burden of proving that there is no genuine issue of material fact is on the moving party. Take v. Commissioner,82 T.C. 630, 633 (1984); Graf v. Commissioner,80 T.C. 944, 946 (1983); Espinoza v. Commissioner,78 T.C. 412, 416 (1982). Therefore, respondent must prove that the Tax Court lacks jurisdiction to consider the question of petitioners' missing refund checks.

In addition, we must view the factual materials and inferences drawn therefrom in the light most favorable to the party opposing the motion. Estate of Gardner v. Commissioner,82 T.C. 989, 990 (1984); Elkins v. Commissioner,supra;Jacklin v. Commissioner,79 T.C. 340, 344 (1982). *119 As a result, the facts set forth herein are taken from petitioners' pleadings, both admitted and denied, and the attorney's affidavit in opposition to respondent's motion. The facts are viewed in the terms most favorable to petitioner. Estate of Gardner v. Commissioner,supra.

It is well settled that the Tax Court is a court of limited jurisdiction, and we may exercise our jurisdiction only to the extent authorized by Congress. Section 7442; ⁵Commissioner v. Gooch Milling & Elevator Co.,320 U.S. 418 (1943); Kluger v. Commissioner,83 T.C. 309, 314 (1984); Medeiros v. Commissioner,77 T.C. 1255, 1259 (1981). It is equally true that, generally, once a petitioner invokes the jurisdiction of the Court, jurisdiction lies with the Court and remains unimpaired until the Court has decided the controversy. Dorl v. Commissioner,57 T.C. 720, 722 (1972), affd. 507 F.2d 406 (2d Cir. 1974). ⁶

The question of the Court's jurisdiction is fundamental and must be addressed when raised by a party or on the Court's own motion. See Estate of Young v. Commissioner,81 T.C. 879, 880-881 (1983); *120 Midland Mortgage Co. v. Commissioner,73 T.C. 902, 905 (1980); Intervest Enterprises, Inc. v. Commissioner,59 T.C. 91, 94 (1972); Goldstein v. Commissioner,22 T.C. 1233, 1236 (1954). ⁷ If we find that we do not properly have jurisdiction to consider an issue, then despite a party's choice of the Tax Court as a forum to settle the dispute, we may not decide the issue. Wheeler's Peachtree Pharmacy, Inc. v. Commissioner,35 T.C. 177, 179 (1960); Shelton v. Commissioner,63 T.C. 193 (1974); Herbert Brush Manufacturing Co. v. Commissioner,22 B.T.A. 646, 647 (1931).

In general, Tax Court jurisdiction exists only if a valid statutory notice of deficiency has been issued by the Commissioner and a timely petition has been filed therefrom. Sections 6212 and 6213; Rules 13 and 20; Midland Mortage Co. v. Commissioner,supra at 907. ^8*121 It is not the actual existence of a deficiency on which the Court's jurisdiction is based, rather it is the Commissioner's determination of a deficiency which provides the basis for our jurisdiction. Hannan v. Commissioner,52 T.C. 787, 791 (1969); Intervest Enterprises, Inc. v. Commissioner,supra at 95.

A deficiency is generally defined as an amount by which the income, gift, or estate tax due under the law exceeds the amount of such tax shown on the return. Section 6211; ^9*122 Bregin v. Commissioner,74 T.C. 1097, 1102 (1980). A deficiency is neither a theory nor an intangible concept. Veeder v. Commissioner,36 F.2d 342, 343 (7th Cir. 1929). ¹⁰ An instance in which the issuance of a statutory notice of deficiency does not confer jurisdiction on the Court occurs when a notice of deficiency is erroneously issued after payment of the tax. Bendheim v. Commissioner,214 F.2d 26, 28 (2d Cir. 1954); Anderson v. Commissioner,11 T.C. 841, 843 (1948). ¹¹

We have jurisdiction to decide not only whether the Commissioner's determination of a deficiency was correct, but also whether a taxpayer's claim that he has overpaid is correct. Russell v. United States,592 F.2d 1069, 1071 (9th Cir. 1979); Estate of Parshelsky v. Commissioner,303 F.2d 14, 22 (2d Cir. 1962). Section 6512(b)(1) gives the Court jurisdiction to determine an overpayment.^12*123 Respondent argues that because Congress has developed a separate statutory scheme for recovery of stolen or forged refund checks, the Court cannot consider petitioner's claim of overpayment, even though excess withholding credits are included in the definition of an overpayment ¹³ and even though the Court has jurisdiction to determine an overpayment. We do not agree that our jurisdiction is barred by this separate statutory scheme.

In determining the amount of an overpayment for the year in which the Commissioner has determined a deficiency, we may take into account payments made by a taxpayer through withholding or by payment of estimated income tax. If these payments exceed the income tax liability for the year in controversy, then an overpayment exists. Keefe v. Commissioner,15 T.C. 947, 955-956 (1950). In fact we recently held that our jurisdiction to determine an overpayment includes the power to consider interest *124 as part of an overpayment. Estate of Baumgardner v. Commissioner, 85 T.C.     (filed Sept. 11, 1985).

We have previously faced a problem similar to the one presented in the instant case. See Bolnick v. Commissioner,44 T.C. 245 (1965). In Bolnick, we held that we would consider the amount claimed by taxpayers on their return as an overpayment, despite the fact that respondent's records indicated a refund check had been issued. In that case, taxpayers maintained that they never received a refund of $778.90 for the taxable year for which respondent had determined a deficiency. We received evidence on the issue and ultimately concluded that there was an overpayment. For our purposes, the important fact is not that the Court decided that taxpayers had made an overpayment; instead, what is significant is the fact that the Court considered taxpayers' claim. ¹⁴ In reaching this conclusion we stated that:

Our jurisdiction is precisely circumscribed by statute and we can only determine the amount of a deficiency or of an overpayment in income tax--or of both--for the taxable year for which respondent has determined a deficiency. Sec. 6512(b), I.R.C. 1954. But in determining the amount *125 of an overpayment, albeit for the same year for which we may determine a deficiency, we are to take into account payments made by the taxpayer by withholding and by payments on declaration of estimated tax, and if the total of such payments exceeds income tax liability for the year in controversy, we are to determine an overpayment. Ernest J. Keefe,15 T.C. 947 (1950). [Bolnick v. Commissioner,supra at 258.] ¹⁵

We do have jurisdiction to *126 determine whether or not petitioners received their refund checks, and if not, whether the amount due them in refunds constitutes an overpayment or reduces the deficiency. Since the function of this Court is to adjudicate deficiency disputes, if we could not consider the issue of petitioners' non-receipt of their refunds, then we would be without an essential power to fulfill our duties. See Stevens v. Commissioner,709 F.2d 12 (5th Cir. 1983).

When a notice of deficiency is mailed to a taxpayer he has two options, one is to petition the Tax Court before payment of the tax, and the other is to pay the tax and sue for a refund in a district court or in the United States Claims Court. Section 7422(a) and (e); ^16*128 Drake v. Commissioner,554 F.2d 736, 739 (5th Cir. 1977). ¹⁷ Once a taxpayer chooses to litigate his claim in the Tax Court, we have exclusive jurisdiction over the issues involved in adjudicating the tax liability. Dorl v. Commissioner,supra at 720; section 6512(a). We acquire jurisdiction when a taxpayer files with the Court and that jurisdiction extends to the entire subject matter of the correct tax for the taxable year. See Erickson v. United States,309 F.2d 760, 767, 159 Ct.Cl. 202, 216 (1962); *127 Peters v. United States,618 F.2d 125, 222 Ct.Cl. 534 (1979); Russell v. United States,supra at 1071.

A dichotomy exists between our function with respect to overpayments and respondent's responsibility to make refunds. While the Court has jurisdiction to determine an overpayment, it has no authority to order or deny a refund. U.S. ex rel Girard Trust Co. v. Helvering,301 U.S. 540, 542 (1937); Hollie v. Commissioner,73 T.C. 1198, 1204 (1980). ¹⁸ Taxpayers have access to the district courts or claims court if any refund suit were necessary. U.S. ex rel Girard Trust Co. v. Helvering,supra.

Respondent's argument that petitioners cannot pursue their contention in the Tax Court because Congress has developed a scheme for recovery of stolen Treasury checks misses the point. ¹⁹ Petitioners *129 base their petition on their claim that no deficiency exists or that there is, perhaps, an overpayment because they have already paid taxes in the amount of the refund checks. Petitioners do not base their claim on the checks themselves.

Petitioners face two problems: (1) a determination of a deficiency in their income tax liability for certain years and (2) non-receipt of their refund checks. The Tax Court has jurisdiction to determine whether or not a deficiency or an overpayment exists. Should we ultimately find that petitioners have overpaid their taxes, and respondent refuses to credit *130 or refund petitioners' taxes, then petitioners may resort to a federal district court or the United States Claims Court for recovery. U.S. ex rel Girard Trust Co. v. Helvering,supra;Robbins Tire & Rubber Co. v. Commissioner,53 T.C. 275, 279 (1969). ²⁰ We have no jurisdiction over a recovery, but this is not what petitioners seek in the Tax Court.

The statutory scheme set out at 31 U.S.C. section 3343 provides only a method for recovering a lost or stolen refund check. If we limit petitioners' remedies to that plan, we would effectively be denying them their right to petition this Court for a redetermination of their income tax liability. Congress has no-where indicated that a taxpayer must follow one path to the exclusion of the other. Petitioners can proceed in this Court while continuing to pursue their claim with the Division of Check Claims. It is true that a decision rendered by either the Court of the Division of Check Claims may have an impact on the proceedings in the other forum; however, we will not and cannot relinquish jurisdiction because a recovery method exists which ought to relieve petitioners of their *131 problem with respect to recovery of their refund checks. ²¹

Judicial economy requires that all issues raised in a case be tried and settled in one proceeding; this has long been our policy. Cf. Estate of Baumgardner v. Commissioner, 85 T.C. (filed Sept. 11, 1985); Markwardt v. Commissioner,64 T.C. 989, 998 (1975) (where we denied taxpayer's request for a second trial when he attempted to raise a new issue not raised at the first trial); Robin Haft Trust v. Commissioner,62 T.C. 145, 147 (1974) (where we denied taxpayer's request for reconsideration of our opinion and to vacate our decision). When we are presented with a case over which we have *132 jurisdiction and in which we possess the necessary and usual powers to resolve the dispute, we must consider all the issues raised by the case. See Kluger v. Commissioner,83 T.C. 309, 314 (1984). Since petitioners have properly invoked the jurisdiction of this Court, if we do not consider whether or not petitioners received their refund checks, we would leave an essential issue unaddressed. The consequences of omitting consideration of this issue might well require additional hearings and evidence thus placing an undue burden on the Court as well as the parties.

There are factual and legal questions which we need not decide at this time. We make no finding herein as to whether respondent properly computed the deficiency. The question of whether the deficiency should be reduced to the extent that refunds were issued by respondent and not received by petitioners will be decided on another day.

Based on the foregoing, respondent's motion for partial summary judgment is denied.

An appropriate order will be issued.