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decision for respondent on the stipulation of settled issues.
According to petitioner, the tentative refunds were “nonrebate”
refunds that do not figure in the section 6211(a) definition of
“deficiency”, which includes only “rebate” refunds. Because the
refunds did not create a deficiency, petitioner’s argument goes,
the Court cannot enter decision on a stipulation of a matter over
which the Court lacks jurisdiction. The issue is complicated, so
we provide a brief overview before addressing it in detail.
Discussion
Rebate and Nonrebate Refunds
The Internal Revenue Code recognizes two types of refunds:
Rebate and nonrebate. O’Bryant v. United States, 49 F.3d 340,
342 (7th Cir. 1995). Rebate refunds are issued on the basis of a
substantive recalculation of a taxpayer’s tax liability, e.g.,
the amount of tax due is less than the tax shown on the return.
Sec. 6211(b)(2); O’Bryant v. United States, supra. If the
recalculation of tax liability is correct, the taxpayer may, of
course, retain the refund. However, sometimes the recalculation
of tax liability is incorrect, and the Commissioner must recover
the erroneous refund. Rebate refunds issued in error may be
recovered through the deficiency procedures of sections 6211-6215
or an action for recovery of an erroneous refund under section
7405.
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