Under section 301.6611-1(b), Proced. & Admin. Regs., the date of overpayment of a tax is the date of payment of the first amount which, when added to previous payments, is in excess of the tax liability (including any interest, addition to tax, or additional amount). This regulation provides that tax overpayments are to be refunded beginning with the first payment that exceeds the tax liability. Accordingly, all of petitioners' tax overpayments for the years in issue that remained outstanding after December 31, 1994, and that petitioners eventually received in 2004 and 2005 constituted overpayments "in excess of $10,000" and, beginning January 1, 1995, accrued interest at the reduced GATT rate.

Appropriate orders will be entered.

LOIS E. ORDLOCK, PETITIONER v. COMMISSIONER OF
INTERNAL REVENUE, RESPONDENT

Docket No. 17021-02.

Filed January 19, 2006.

P resides in a community property State. P and H filed joint
tax returns for 1982, 1983, and 1984. P and H paid the
reported tax liabilities. Additional tax liabilities-i.e., under-
statements-arose that were attributable to erroneous items
of H (H's understatements). The parties agree that P is enti-
tled to sec. 6015(b), I.R.C., relief for the years in issue and P's
liability for these years is zero after application of sec.
6015(b), I.R.C. After the years at issue until the present, R
applied numerous payments to H's understatements. One pay-
ment was from P's "separate property", as defined by Cal.
Fam. Code sec. 770(a) (West 2004). All other payments were
from P and H's "community property", as defined under Cal.
Fam. Code sec. 760 (West 2004). P seeks a refund pursuant
to sec. 6015(g), I.R.C., of the payments R applied to H's under-
statements made with her separate property and with the
community property. R does not dispute that P may be enti-
tled to a refund for the payment made from her separate
property unless sec. 6511, I.R.C., applies. Held, P is not enti-
tled to a refund of amounts from community property used to
pay H's understatements.

Clayton J. Vreeland, for petitioner.
Patrick W. Lucas, for respondent.

OPINION

GOEKE, Judge: Respondent determined that petitioner is entitled to relief under section 6015(b).1 The issue for decision is the amount of refund, if any, petitioner is entitled to under section 6015(g).

Background

The parties submitted this case fully stipulated under Rule 122. The stipulation of facts and the attached exhibits are incorporated herein by this reference.

On July 26, 2002, respondent sent petitioner a Notice of Determination Concerning Your Request for Relief from Joint and Several Liability Under Section 6015 (notice of determination). The notice of determination indicates that petitioner is entitled to relief under section 6015(b) of $160,912 for taxable years 1982, 1983, and 1984, for which she and her spouse (Mr. Ordlock) filed joint Federal income tax returns. The following table provides the specific adjustments for each taxable year in issue as stated in the notice of determination:

The notice of determination further specifies that "We've granted your request in full, you don't have to take any further action."

On November 1, 2002, the date the petition was filed, petitioner resided in Anaheim, California.2 In her petition, petitioner, through her attorney, alleged that

The Commissioner has apparently determined to allow Petitioner's request in full, but the Notice [of determination] does not expressly state that Petitioner's request is allowed in full, and the Notice [of determination] contains various erroneous amounts and calculations which misstate and miscalculate the amounts of relief for which Petitioner is eligible under

1 Unless otherwise indicated, all section references are to the Internal Revenue Code as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

2 We note that petitioner's petition was postmarked Oct. 24, 2002, and was therefore timely.

Code Section 6015(b). The effect of these misstatements and miscalculations is that the Notice [of determination] does not allow Petitioner's request for relief in full. Therefore, this petition is necessary in order to verify that the Commissioner intended to allow Petitioner's request in full and to correctly determine and state the full amount of relief for which Petitioner is eligible under Code Section 6015(b).

Given these allegations, petitioner prayed that

this Court may hear the case and determine (i) that Petitioner is entitled to relief from all joint and several liability on the joint returns of Petitioner and her spouse for each of the 1982, 1983, and 1984 tax years, in the full amount of such liability that was unpaid as of July 22, 1998, and (ii) that Petitioner is further entitled to relief from all joint and several liability for interest, penalties, and other amounts attributable to such unpaid (as of July 22, 1998) liability, and (iii) that the Court grant such other and further relief to which Petitioner may be entitled.

In short, petitioner's petition took issue with the scope of the section 6015(b) relief granted to petitioner in the notice of determination.3

At trial, on January 5, 2004, the parties made a joint motion for leave to submit case under Tax Court Rule 122, which the Court granted.

The parties agree that petitioner is entitled to section 6015(b) relief from joint and several liability for the taxable years 1982, 1983, and 1984. The parties further agree that the application of section 6015(b) causes petitioner to have a Federal income tax liability (including interest, penalties, and other amounts) of zero for those years.

Reported Taxes and Payments

Petitioner and Mr. Ordlock (the Ordlocks) filed joint Federal income tax returns for the taxable years 1982, 1983, and 1984. On their returns they reported Federal income tax owed for each year. Respondent made numerous assessments for penalties, additional amounts of tax owed, and interest for the years in issue. The information most relevant to the refund issue presented includes the payments and credits applied to the Ordlocks' 1982, 1983, and 1984 taxable years, which were made from "community property" assets as defined in Cal. Fam. Code sec. 760 (West 2004), unless otherwise indicated. All of the payments for the years in issue are

3 We note that the issue of whether petitioner is entitled to a refund was not specifically raised in the petition but was subsequently raised and briefed by the parties.

shown in the appendix hereto. The Ordlocks remained married at the time the payments on these tax liabilities were made. Although the parties agree that one payment was from separate property and the rest from community property, no effort has been made at this stage of the litigation to trace the actual sources of the payments listed in the appendix.

A. 1982

The Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for the Ordlocks' 1982 taxable year does not list their adjusted gross income or taxable income. However, the Ordlocks' 1982 tax return was filed on June 22, 1983, and reported $23,569 of Federal income tax owed. From April 15, 1983, through May 7, 2003, the Ordlocks made numerous payments, and respondent applied an overpayment credit to their 1982 tax liability. The payments and credits totaled $142,882.67.

B. 1983

The Ordlocks received an extension of time until August 15, 1984, to file their 1983 return. On June 6, 1984, the Ordlocks filed their 1983 return reporting $105,571 of Federal income tax owed. The Form 4340 for the Ordlocks' 1983 taxable year shows their adjusted gross income was $544,739 and taxable income was $400,852. From April 15, 1984, through May 5, 1998, the Ordlocks made numerous payments, and respondent applied overpayment credits to the Ordlocks' 1983 tax liability. The payments and credits totaled $293,626.95.

C. 1984

The Ordlocks received an extension of time to file their 1984 tax return until August 15, 1985. The Ordlocks reported $92,787 of Federal tax income owed for 1984 on their return, which was filed May 5, 1985. The Form 4340 for the Ordlocks' 1984 taxable year shows their adjusted gross income was $489,194 and taxable income was $436,822. From April 15, 1985, through May 9, 2002, the Ordlocks made payments and respondent applied overpayment credits to their 1984 tax liability. The payments and credits totaled $95,645.31.

Discussion

Whether petitioner is entitled to a refund under section 6015(g) related to community property assets used to pay Mr. Ordlock's understatements presents an issue of first impression for this Court.5 Relief from joint and several tax liability for the taxable years in issue is not an issue because respondent has conceded that petitioner is eligible for relief under section 6015(b).

I. Is Petitioner Entitled to a Refund?

A. The Parties' Contentions and the Issue Presented

Petitioner contends that section 6015(g) is unambiguous and its application entitles her to a refund of community property assets used to pay Mr. Ordlock's understatements. Respondent argues that petitioner is not entitled to a refund of community property assets. Respondent contends that the "relief" provided to petitioner under section 6015(b) is relief from being held jointly or severally liable for her and Mr. Ordlock's 1982, 1983, and 1984 joint tax liabilities. Respondent further argues that section 6321 provides for a lien on the Ordlocks' community property to secure Mr. Ordlock's liability and therefore no refund of community property can be granted.

The crux of this dispute is the application of the last sentence of section 6015(a) and the language of section 6015(g)(1). The last sentence of section 6015(a) provides: "Any determination under this section shall be made without regard to community property laws." Section 6015(g)(1) provides as follows:

SEC. 6015(g). CREDITS AND REFUNDS.

(1) IN GENERAL.-Except as provided in paragraphs (2) and (3), notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.

The dispute turns on the meaning of the phrases "Any determination under this section" in section 6015(a) and "notwith

4 The parties' filings address neither when the period of limitations under sec. 6511 expires in this case, nor whether petitioner has filed a refund claim within that period. Consequently, we do not discuss these issues.

5 This is not the first instance this issue has arisen in Federal tax litigation. See United States v. Stolle, 86 AFTR 2d 5180, 2000–1 USTC par. 50,329 (C.D. Cal. 2000).