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Freijes' 1997 account in the amount of $11,776 on July 8, 1998,
which amount exceeded all assessments for 1997. As a
consequence, respondent issued the Freijes a refund of $5,513 on
August 3, 1998. At a time not disclosed in the record,
respondent corrected the $10,000 error by reversing $10,000 of
the $11,776 previously credited.5 Subsequent remittances made by
the Freijes in 1999 without designation for any year, totaling
$6,500, were posted to their 1997 account as follows: $1,800 on
May 26, 1999; $2,400 on June 16, 1999; $1,200 on July 9, 1999;
and $1,100 on July 26, 1999.
The Freijes timely filed a joint Federal income tax return
for the 1998 taxable year (1998 return) reporting a tax due of
$11,686 and no withholding credits or estimated tax payments.
(The Freijes' actual withholding credits for 1998 were $4,094.)
A payment of $3,000 was sent with the 1998 return. Subsequent
remittances of $1,000 and $1,587 were credited against their 1998
liability on April 19 and October 27, 1999, respectively.
4(...continued)
reported as due on the 1997 return.
5 While this reversing entry is dated July 8, 1998, on the
Freijes' Form 4340, Certificate of Assessments, Payments, and
Other Specified Matters, for 1997, we conclude that it did not
occur on that date, as the refund triggered by the erroneous
posting of this amount was issued almost 1 month later. We are
persuaded that respondent did not become aware of the error until
sometime after this refund was issued to the Freijes.
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