- 14 -
to invoke the doctrine of equitable recoupment to reduce that
deficiency by the amount of the income tax overpaid because of
its use of the same underreported value as the basis of the
shares.
Legatee Not Diligent
Respondent argues that equitable recoupment should not be
permitted in this case because March was not diligent in seeking
a refund of the income tax paid on the gain passed through to her
as residual legatee. The estate tax notice of deficiency was
issued on March 16, 1995, and the limitations period did not
expire on March's income tax refund until April 15, 1996. March
thus had more than a year within which to file a protective claim
for refund.
In addressing this issue in United States v. Bowcut, 287
F.2d 654, 657 (9th Cir. 1961), the Court of Appeals for the Ninth
Circuit, citing Bull v. United States, 295 U.S. 247 (1935),
stated:
It is apparently not the diligence of the taxpayer as
to his legal rights which controls, but rather the
inequity of holding that, while the government's rights
under a transaction continue unimpaired, its
adversary's rights thereunder are barred by
limitations.
Accordingly, we do not consider March's lack of diligence to
be a factor in deciding whether petitioner is entitled to claim
equitable recoupment.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011