Frequently Asked Questions
Who is eligible for the Doctrine of Equitable Recoupment?
Requires a single transaction or event to be subjected to two taxes on inconsistent legal theories where one is barred by the statute of limitations.
How does the Doctrine of Equitable Recoupment work?
The Tax Court can apply equitable recoupment to allow a taxpayer to offset a tax deficiency in one year with a tax overpayment from a different year that is otherwise barred by the statute of limitations, provided they arise from the same transaction.
What law authorizes the Doctrine of Equitable Recoupment?
The Doctrine of Equitable Recoupment is authorized under IRC §6214(b) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §6214
Source: Internal Revenue Code, Title 26, United States Code
§ 6214. Determinations by Tax Court(a) Jurisdiction as to increase of deficiency, additional amounts, or additions to the taxExcept as provided by section 7463, the Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any additional amount, or any addition to the tax should be assessed, if claim therefor is asserted by the Secretary at or before the hearing or a rehearing.
(b) Jurisdiction over other years and quartersThe Tax Court in redetermining a deficiency of income tax for any taxable year or of gift tax for any calendar year or calendar quarter shall consider such facts with relation to the taxes for other years or calendar quarters as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year or calendar quarter has been overpaid or underpaid. Notwithstanding the preceding sentence, the Tax Court may apply the doctrine of equitable recoupment to the same extent that it is available in civil tax cases before the district courts of the United States and the United States Court of Federal Claims.
(c) Taxes imposed by section 507 or chapter 41, 42, 43, or 44The Tax Court, in redetermining a deficiency of any tax imposed by section 507 or chapter 41, 42, 43, or 44 for any period, act, or failure to act, shall consider such facts with relation to the taxes under chapter 41, 42, 43, or 44 for other periods, acts, or failures to act as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the taxes under chapter 41, 42, 43, or 44 for any other period, act, or failure to act have been overpaid or underpaid. The Tax Court, in redetermining a deficiency of any second tier tax (as defined in section 4963(b)), shall make a determination with respect to whether the taxable event has been corrected.
(d) Final decisions of Tax CourtFor purposes of this chapter, chapter 41, 42, 43, or 44, and subtitles A or B the date on which a decision of the Tax Court becomes final shall be determined according to the provisions of section 7481.
(e) Cross referenceFor provision giving Tax Court jurisdiction to order a refund of an overpayment and to award sanctions, see section 6512(b)(2).
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