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transaction, item, or event affecting the same taxpayer or a
sufficiently related taxpayer. Estate of Mueller v.
Commissioner, 101 T.C. 551, 552 (1993) (Mueller II);10 see also
United States v. Dalm, supra at 605-606 n.5; Bull v. United
States, supra. Equitable recoupment operates as a defense that
may be asserted by a taxpayer to reduce the Commissioner’s timely
claim of a deficiency, or by the Commissioner to reduce the
taxpayer’s timely claim for a refund. O’Brien v. United States,
766 F.2d 1038, 1049 (7th Cir. 1985); Estate of Mueller v.
Commissioner, supra at 552; Estate of Orenstein v. Commissioner,
T.C. Memo. 2000-150. When applied for the benefit of a taxpayer,
the equitable recoupment doctrine allows a taxpayer to recoup the
amount of a time-barred tax overpayment by allowing the
overpayment to be applied as an offset against a deficiency if
certain requirements are met. Bull v. United States, supra at
259-263; Crop Associates-1986 v. Commissioner, 113 T.C. 198, 200
(1999).
10In Estate of Mueller v. Commissioner, T.C. Memo. 1992-284,
we redetermined the increased value of certain shares of stock
included in the decedent’s gross estate. In Estate of Mueller v.
Commissioner, 101 T.C. 551 (1993), we denied the Commissioner’s
motion to dismiss for lack of jurisdiction in respect of the
taxpayer’s partial affirmative defense of equitable recoupment.
In Estate of Mueller v. Commissioner, 107 T.C. 189 (1996), affd.
on other grounds 153 F.3d 302 (6th Cir. 1998), we rejected the
taxpayer’s equitable recoupment claim on the ground that
equitable recoupment is restricted to use as a defense against an
otherwise valid claim for a deficiency and the doctrine may not
be used to increase the amount of a tax overpayment where it is
determined that no deficiency exists.
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