Marisol filed her Year 1 tax return on May 1, Year 2, without having obtained an extension of time to file. $10,000 of tax had been withheld from her wages. She computed a tax liability of S11,000, so she mailed a check for $1,000 with the Year 1 return. On April 20, Year 5, the IRS mailed Marisol a notice of deficiency, which she received on April 25, Year 5, reflecting the Commissioner's determination of a def ciency of $500. The $500 deficiency is attributable to income allegedly received he Marisol and not reported on the return. Marisol believes that she does not owe the $500 and that she is in fact entitled to a refund of $700 of the amounts already paid.

A. Assume that Marisol filed a Tax Court petition on May 1, Year 5, contestine the notice of deficiency and claiming that she made an overpayment of $700. Can the Tax Court order the IRS to refund $700 to Marisol if the court agrees with her on the merits?

B. Assume Marisol paid the $500 deficiency on May 1, Year 5.

i. If Marisol wishes to pursue a refund in federal district court of the $1,200 (the $500 paid in response to the notice plus the $700 alleged overpayment), when is the last day on which she can file a timely refund claim with the IRS to be entitled to pursue a refund of at least some of the $1,200?

ii. Assume that Marisol filed a timely claim for refund only of the $500, and, after receiving a notice of disallowance of her claim, fileda timely suit for refund of the $500 on June 1, Year 6. The IRS has not only contested Marisol's entitlement to a refund of the $500, but also has counterclaimed for $800 based on the disallowance of certain deductions. If the court enters a decision on May 5, Year 7 in Marisol's favor on the $500 issue and in the IRS's favor on the $800 issue, what amount, if any, may each side
collect from the other?

Answer rating: 100% (QA)

Court will not order IRS to adjust those 700 Dollar claimed by her to have been paid extra on year 2 ... View the full answer