- 8 -
proper basis for recoupment. See Estate of Bartels v.
Commissioner, supra. Hence, we need address only the parties’
contentions regarding our authority to grant such relief.
B. The Tax Court Position
The issue of whether this Court possesses authority to
recognize an equitable recoupment defense has a long history.
Prior to our decision in Estate of Mueller v. Commissioner,
supra, we adhered to the view that we lack jurisdiction to apply
equitable recoupment. See Estate of Schneider v. Commissioner,
93 T.C. 568, 570 (1989); Phillips Petroleum Co. v. Commissioner,
92 T.C. 885, 889-890 (1989); Estate of Van Winkle v.
Commissioner, 51 T.C. 994, 999-1000 (1969). This position was
based in large part on Commissioner v. Gooch Milling & Elevator
Co., 320 U.S. 418, 420-422 (1943), in which the U.S. Supreme
Court held that the limited jurisdiction of the Board of Tax
Appeals, an administrative agency and the predecessor of the Tax
Court, did not extend to claims of equitable recoupment.
In 1990, however, the Supreme Court noted in United States
v. Dalm, 494 U.S. 596, 611 n.8 (1990): “We have no occasion to
pass upon the question whether Dalm could have raised a
recoupment claim in the Tax Court.” We concluded from this
statement that the Supreme Court left open whether the Tax Court,
as presently constituted in the form of a court of law under
Article I of the Constitution, see Freytag v. Commissioner, 501
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