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for each year, and the resulting tax decrease should be computed
for each year. The total of these tax decreases for prior years
is the amount that is available as a credit for 1992 pursuant to
section 1341(a)(5)(B).
Both parties agree that petitioner will be entitled to an
overpayment as a result of applying section 1341(a)(5) and
(b)(1), but they disagree about whether section 1341(b)(1) sets
the limit on the amount of the overpayment.
For purposes of applying section 1341(b)(1) to these cases,
the "taxable year" is 1992. Section 1341(b)(1) provides in
pertinent part that "If the decrease in tax ascertained under
subsection (a)(5)(B) exceeds the tax imposed by this chapter for
the taxable year (computed without the deduction) such excess
shall be considered to be a payment of tax on the last day
prescribed by law for the payment of tax for the taxable year,
and shall be refunded or credited in the same manner as if it
were an overpayment for such taxable year." Respondent argues
that the amount of the overpayment for 1992 is limited to the
amount described in section 1341(b)(1). Petitioner disagrees.
Again, neither party cites any previous cases dealing with this
issue, and we have found none.
Section 1341 provides a method for determining the tax for a
year in which a taxpayer repays items that had been reported as
income in prior years under claim of right. Under section
1341(a)(5), the first step is to compute the tax for the taxable
year (1992) without regard to any deduction allowable pursuant to
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