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On February 3, 1997, respondent assessed petitioners’ tax,
as well as any penalties and interest as provided by law, for
each of their taxable years 1994 and 1995.
In April 1998, petitioners jointly filed Form 1040 for their
taxable year 1997 (1997 return). In their 1997 return, petition-
ers claimed a refund of $1,741 (petitioners’ 1997 overpayment).
On April 15, 1998, when petitioners’ 1997 return was due,
petitioners’ unpaid tax liability for 1990 (petitioners’ unpaid
1990 liability) exceeded $1,741, the amount of petitioners’ 1997
overpayment. On a date after April 15, 1998, and before June 8,
1998, that is not disclosed by the record, respondent applied
petitioners’ 1997 overpayment as a credit against petitioners’
unpaid 1990 liability; i.e., respondent used that overpayment to
offset part of that liability.3
On May 18, 1998,4 petitioners filed a petition (bankruptcy
3In a notice dated June 8, 1998 (June 8, 1998 notice) relat-
ing to petitioners’ taxable year 1997, respondent informed
petitioners that respondent had applied petitioners’ 1997 over-
payment to “OTHER FEDERAL TAXES” and that petitioners were not
entitled to any refund for their taxable year 1997. Only the
first page of the June 8, 1998 notice is part of the instant
record. The portion of that notice which showed, inter alia, the
“OTHER FEDERAL TAXES” to which respondent applied petitioners’
1997 overpayment is not part of the record in this case. How-
ever, the parties stipulated that respondent applied the 1997
overpayment as a credit against petitioners’ unpaid 1990 liabil-
ity.
4The parties stipulated that petitioners filed their bank-
ruptcy petition on May 8, 1998. That stipulation is clearly
contrary to the date of May 18, 1998, that the U.S. Bankruptcy
(continued...)
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