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Petitioners contend that, even though they incorrectly
reported the amount of their wage and salary income on page 1 of
their return, the second page of their return and their
computation of tax was based on the correct amount of their wage
and salary income but admittedly did not include the $198 in
dividend and interest income. Therefore, petitioners contend
that, since respondent remitted $2,426 to them as the refund of
an overpayment, respondent is precluded from issuing a notice of
deficiency simply to rectify an error that respondent committed.
Petitioners further contend that the interest on the deficiency
should be abated if they are held liable for the amount of the
deficiency because the refund was based on an error by
respondent.
The law is well settled that the granting of a refund does
not preclude the Commissioner from issuing a notice of deficiency
to recover the refund. See Gordon v. United States, 757 F.2d
1157, 1160 (11th Cir. 1985); Beer v. Commissioner, 733 F.2d 435,
437 (6th Cir. 1984), affg. T.C. Memo. 1982-735; Warner v.
Commissioner, 526 F.2d 1, 2 (9th Cir. 1975), affg. T.C. Memo.
1974-243. The taxpayers in Gordon v. United States, supra, and
in Warner v. Commissioner, supra, made the same argument that
petitioners are making here; i.e., that the Commissioner should
not be allowed to make refunds and then demand repayment. To
this argument, the Courts of Appeals stated: "'Alas, the
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