- 8 - the party asserting equitable recoupment may not affirmatively collect the time-barred underpayment or overpayment of tax. Equitable recoupment "operates only to reduce a taxpayer's timely claim for a refund or to reduce the government's timely claim of deficiency". O'Brien v. United States, 766 F.2d 1038, 1049 (7th Cir. 1985). [Estate of Mueller v. Commissioner, 101 T.C. at 552.] The opinion in O'Brien v. United States, 766 F.2d 1038, 1049 (7th Cir. 1985), also supports respondent's position that equitable recoupment may be used only as a defense against the additional tax that would otherwise be due: Recoupment * * * will permit a taxpayer to recoup an erroneously paid tax, the refund of which is time- barred, against a timely and correctly asserted deficiency by the government. The doctrine thus operates only to reduce * * * the government's timely claim of deficiency; it does not allow the collection of the barred tax itself. In summary, the doctrine requires some validly asserted deficiency or refund against which the asserting party desires to recoup a time-barred refund or deficiency. * * * * * * * Attempts by taxpayers to utilize the doctrine to revive an untimely affirmative refund claim, as opposed to offset a timely government claim of deficiency with a barred claim of the taxpayer, have been uniformly rejected. * * * [Id. at 1049; citation omitted.] Likewise, in Brigham v. United States, 200 Ct. Cl. 68, 80-81, 470 F.2d 571, 577 (1972), the court explained the function of equitable recoupment as follows: When its benefits are sought by the taxpayer, the function of the doctrine is to allow the taxpayer toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011