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In O’Bryant v. United States, supra, the Commissioner
determined that the taxpayers had not properly computed their tax
for 1984. After some discussion, the parties agreed on an
additional amount due, and the Commissioner made an assessment of
that amount. In August 1987, the taxpayers paid $27,999 in full
payment of all amounts due for 1984. The taxpayers did not
request a refund, but they received a check from respondent dated
January 1, 1988, for $28,925. Id. at 342. Notations on the
check indicated that it was a refund of the amount paid in August
1987, plus interest. The refund was caused by the Commissioner’s
crediting the August 1987 payment twice to the taxpayer’s 1984
account. O’Bryant v. United States, 839 F. Supp. 1321, 1323
(C.D. Ill. 1993). The Commissioner attempted to collect the
$28,925 through the summary collection procedures under section
6502(a)(1), which requires an assessment of liability.
The Court of Appeals for the Seventh Circuit found that the
refund was a nonrebate refund because it was paid by reason of an
accounting error by the IRS. O’Bryant v. United States, 49 F.3d
at 342. The court emphasized the fundamental difference in
character between rebate and nonrebate refunds: Nonrebate
refunds are issued by the Commissioner by accident, while rebate
refunds are issued because of the taxpayer’s tax liability. Id.
at 346; see also Clark v. United States, 63 F.3d 83 (1st Cir.
1995). Accordingly, the Commissioner was limited to an erroneous
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