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6211(a)(1)(B). Accordingly, the payments in issue did not reduce
the deficiency in the instant case.
We do not have jurisdiction over the issue of whether
respondent improperly credited the payments in issue because
respondent credited $10,406.63 to Mr. Ryals’s 1978 tax liability,
pursuant to section 6402(a), after petitioners reported an
overpayment of $17,645 on their 2002 tax return. This Court does
not have jurisdiction to review the credit made by the
Commissioner pursuant to section 6402(a) in the instant case.
See sec. 6512(b)(4); Savage v. Commissioner, 112 T.C. 46, 49-51
(1999).6
Because our decision will include a section 6662(a) penalty,
we address whether the payments in issue reduce the underpayment
on which the penalty is imposed even though the parties did not
raise the issue. In Woods v. Commissioner, 91 T.C. 88, 99
(1988), we held that “withholding credits must be subtracted from
the ‘understatement’ to arrive at the ‘amount of any
underpayment’” in computing the addition to tax under section
6661(a).7
After our decision in Woods, the Omnibus Budget
Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721, 103 Stat.
6Cf. Smith v. Commissioner, 123 T.C. 15, 26 (2004), revd. on
other grounds 429 F.3d 533 (5th Cir. 2005).
7Former sec. 6661 provided an addition to tax for a
substantial understatement of a liability. The amount of the
addition to tax was 25 percent of the amount of any underpayment
attributable to such understatement.
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