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Click here for the full text of this decision FACTS:The estate of Algerine Allen Smith filed its initial tax return on July 12, 1991. In 1994, the commissioner of the Internal Revenue Service issued a notice of deficiency and a penalty. The estate filed a petition to redetermine the deficiency, and in February 1998, the Tax Court held that the deficiency should be $564,429 and that no penalty applied. In March 1998, the estate paid $646,325 to cover the deficiency, plus underpayment interest. Because the commissioner found that the underpayment interest was $410,848, it applied $501,377 of the estate’s payment, as well as an overpayment credit from the estate’s 1992 return to satisfy the estate tax deficiency. The rest of the estate’s March 1998 payment was applied to the underpayment interest. Much litigation ensued, including a ruling from this court reversing the Tax Court. On remand, the commissioner and the state entered a stipulated computation of the tax under Tax Court Rule 155. A document called “Respondent’s Computation for Entry of Decision” stated the estate agreed to an estate tax liability of $385,747 and an overpayment of $238,847. In supporting documentation attached to the computation, the “Total Federal Interest Deduction” was listed as $209,943, to be considered underpayment interest due that was allowed to be deducted in the computation of the stipulated estate tax liability. Though the parties agreed to the $209,943 figure, on page six of the document, the interest assessment was not adjusted, and the interest column from another form Form 3623 contains only the original assessment and March 1998 payment, though it lists that number as being “For Information Only.” On Jan. 24, 2002, the Tax Court entered a judgment that the estate had an overpayment of estate tax in the amount of $238,847. The estate appealed to this court, which affirmed. In May 2002, the commissioner entered adjustments to its accounts in accordance with the Tax Court judgment. The commissioner abated the tax by $238,847, and also abated $180,564 in underpayment interest. This resulted in a balance of $85,336 in assessed, but unpaid interest. Also in May 2002, the commissioner refused the estate $153,510, crediting the difference between the refund and the overpayment of $85,336 against the assessed but unpaid interest owed by the estate. Later in May 2002, the commissioner noticed a timing error that affected the calculation of interest. To correct the error, the commissioner abated and refunded $20,341 of the underpayment interest. Consequently, the estate got $173,851 of the $238,847, with the balance representing interest that the estate could deduct in determining the final, agreed estate tax liability and overpayment. The estate filed a motion to proceed to enforce the overpayment decision, seeking an additional $85,336 plus interest. The Tax Court, sitting en banc, granted the motion and ordered the commissioner to refund the full amount of the estate’s overpayment, plus interest and less any amounts that were previously refunded. The dissenting opinion in the case agreed with the commissioner that the Rule 155 computation did not take the past interest into account and was thus silent on the question of interest. The dissent would also have held that the Tax Court lacked jurisdiction to consider the estate’s challenge to the commissioner’s crediting of the unpaid interest against the agreed overpayment. The commissioner filed a motion for leave to vacate the Tax Court decision, which the Tax Court denied. HOLDING:Vacated. The court explains the procedural posture of this case: The Tax Court originally acquired jurisdiction when the estate appealed the commissioner’s notice of deficiency. When the Tax Court found that there was a deficiency, but that the estate had made an overpayment of tax, the Tax Court had jurisdiction under 26 U.S.C. � 6512(b) to determine the amount of the overpayment, which it did when it approved and entered judgment on the Rule 155 stipulation of the parties that the overpayment of tax in this case was $238,847. When that judgment became final, the commissioner was required to credit or refund that amount to the estate under � 6512(b)(1). The court then notes that the commissioner and the tax court disagree over whether an overpayment judgment covers only overpayment of the estate tax or whether it resolves a taxpayer’s total overpayment of both tax and underpayment of interest. Under the commissioner’s view, the Tax Court has no jurisdiction to review an offset under �6512(b)(4), which says the Tax Court “shall have no jurisdiction under this subsection to restrain or review any credit or reduction made by the Secretary under section 6402.” In the Tax Court’s view, the commissioner had no right to offset interest already taken into account and incorporated in its judgment because the offset had the effect of decreasing the refund due to the estate under the Tax Court judgment. The court favorably cites the Tax Court decision’s dissent, which says that the applicable statutes are intended to permit the offset of overpayment with interest liability, even when they arise in the same statutory year. The court further explains that IRC �7481 allows the Tax Court to determine any interest overpayment or underpayment after the Tax Court has determined that there is an overpayment of tax pursuant to �6512(b). If the Tax Court determines that there has been an overpayment of interest or the commissioner has made an underpayment of interest, “that determination shall be treated under �6512(b)(1) as a determination of an overpayment of tax” which order is then reviewable in the same manner as a decision of the Tax Court. “In this case, where the record reflects that the Estate’s liability for underpayment interest was not decided in determining the taxpayer’s overpayment, we conclude that the Tax Court exceeded its jurisdiction under �6512(b)(2) by ordering the Commissioner to refund the full amount of the overpayment. The Commissioner properly exercised his authority under �6402 to offset the unpaid interest against the overpayment of tax. Because the Tax Court had not decided the Estate’s liability for underpayment interest in its overpayment determination, its jurisdiction to enforce that determination did not include ordering the Commissioner not to offset the refund against that liability. Similarly, in this situation, the Tax Court’s actions constitute a review of the Commissioner’s offset, which the Tax Court specifically lacks jurisdiction to do under �6512(b)(4).” OPINION:Davis, J.; Davis, Jones and Garza, JJ. Editor’s note: Below is a list of petitions for discretionary review granted by the Court of Criminal Appeals during the past week. The list is updated on Texas Lawyer’s Web site, www.texaslawyer.com , where readers also can find a complete list of petitions granted so far during the 2005-2006 term. Also the online and e-mailed daily Texas Lawyer Case Alert includes information on petitions granted.

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