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accepted their return and issued them a refund as claimed on
their return. Petitioners’ argument is without merit.
A refund is not binding on respondent in the absence of a
closing agreement, valid compromise, or final adjudication.
Meridian Mut. Ins. Co. v. Commissioner, 44 T.C. 375, 379 (1965),
affd. 369 F.2d 508 (7th Cir. 1966). Further, it is well settled
that the granting of a refund does not preclude respondent from
issuing a notice of deficiency merely because he accepted a
taxpayer’s return and issued a refund. O’Bryant v. United
States, 49 F.3d 340, 342 (7th Cir 1995); 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; Baasch v. Commissioner, T.C. Memo. 1991-134, affd.
without published opinion (2d Cir. 1992). Furthermore, we note
that refunds of alleged excess withholdings without prior audit
are a matter of grace to the taxpayer, made in consequence of an
amount due as shown on the return, and are subject to final audit
and adjustment; therefore, such refunds are not final
determinations so as to preclude subsequent adjustment. Clark v.
Commissioner, 158 F.2d 851 (6th Cir. 1946), affg. a Memorandum
Opinion of this Court; Owens v. Commissioner, 50 T.C. 577 (1968).
We have previously denied estoppel claims of taxpayers based on
the same argument that petitioners in the instant case have made.
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Last modified: May 25, 2011