- 6 -
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971). We disagree with respondent and, for the reasons
explained below, hold for petitioners.
II. Equitable Recoupment
A. General Rules
To “recoup” is to “get back the equivalent of something
lost.” Crop Assoc.-1986 v. Commissioner, 113 T.C. 198, 200
(1999). Equitable recoupment, in turn, is a judicially created
doctrine under which a claim for a refund of or deficiency in
taxes barred by a statute of limitations may nonetheless be
recouped, or offset, against a tax claim of the Government (in
the case of a time-barred refund) or of the taxpayer (in the case
of a time-barred deficiency assessment). See Bull v. United
States, 295 U.S. 247, 262 (1935); Crop Assoc.-1986 v.
Commissioner, supra at 200; Estate of Mueller v. Commissioner,
supra at 551-552. Equitable recoupment operates only in the
nature of a defense to reduce the Government’s timely claim for a
deficiency, or the taxpayer’s timely claim for a refund, not
affirmatively to collect the time-barred overpayment or
underpayment. See Bull v. United States, supra at 262; Estate of
Branson v. Commissioner, supra at 9-10; Estate of Mueller v.
Commissioner, supra at 552.
The purpose of the equitable recoupment doctrine is “to
preclude unjust enrichment of a party to a lawsuit and to avoid
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