- 2 - The Court also concluded that S was liable for an income tax deficiency to the extent MI’s payment of certain expenses was unreasonable in amount and constituted a constructive dividend to S and S constructively received interest income on loans he made to MI. R filed computations for entry of decision pursuant to Rule 155, Tax Court Rules of Practice and Procedure. S and MI objected to R’s computations because they did not reflect an offset against their income tax deficiencies equal to the amount of hospital taxes that S and MI overpaid under secs. 3101(b) and 3111(b), I.R.C., in respect of the portion of S’s compensation that the Court recharacterized as a disguised dividend. After the submission of the computations and related objections, Congress passed the Pension Protection Act of 2006 (PPA), Pub. L. 109-280, sec. 858, 120 Stat. 1020, which amended sec. 6214(b), I.R.C., to provide that the Tax Court may apply the doctrine of equitable recoupment, effective for any action or proceeding in the Court with respect to which a decision has not become final as of Aug. 17, 2006. Sec. 6214(b), I.R.C., as amended by PPA sec. 858, provides that the Court has jurisdiction to apply the doctrine of equitable recoupment to the same extent that the doctrine is available in civil tax cases before the District Courts of the United States and the U.S. Court of Federal Claims. Held: Where, as here, the Court has original jurisdiction to redetermine a deficiency pursuant to sec. 6213(a), I.R.C., the Court may apply the equitable recoupment doctrine even if the Court lacks subject matter jurisdiction over the type of tax to which the equitable recoupment claim is directed. Held, further: The requirements for establishing a claim of equitable recoupment are satisfied in this case, and S and MI are entitled to an offset against their income tax deficiencies equal to the hospital taxes that S and MI paid on the portion of S’s compensation that the Court recharacterized as a disguised dividend.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: March 27, 2008