                  T.C. Summary Opinion 2001-14



                     UNITED STATES TAX COURT


                  JANET SCHOENE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 3109-99S.                 Filed February 15, 2001.


     Hedy P. Forspan, David Herman, and Peter Mendelsohn

(specially recognized), for petitioner.

     Lydia A. Branche and Peter J. Labelle, for respondent.



     POWELL, Special Trial Judge:   This case was heard pursuant

to the provisions of section 74631 of the Internal Revenue Code

in effect at the time the petition was filed.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.



1
   Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                               - 2 -

     The issue is whether petitioner is time barred from claiming

a refund of a $7,733 overpayment for her 1994 tax year.

Respondent contends that petitioner is time barred from recovery

by the operation of sections 6511 and 6512(b).   Petitioner

contends, however, that she was “financially disabled” within the

meaning of section 6511(h), and, therefore, the period of

limitations set forth in section 6511 was tolled.   At the time

the petition was filed, petitioner resided in New York, New York.

     The facts are not in dispute and may be summarized as

follows.   From 1994 to at least 1997, petitioner suffered from

depression.   With respect to her 1994 Federal income tax return,

petitioner, through her accountant, requested and received an

automatic extension to file her return.   Prior to the August 15,

1995, filing deadline petitioner requested and received an

additional extension to file until October 15, 1995.   Petitioner,

however, did not submit her 1994 Federal income tax return until

after respondent issued the notice of deficiency in 1998.

     Based on third party information, respondent prepared a

substitute return and issued a notice of deficiency to petitioner

on December 1, 1998.   Respondent determined a deficiency and

additions to tax in petitioner’s 1994 Federal income tax as

follows:
                                 - 3 -

                                       Additions to Tax
     Deficiency             Sec. 6651(a)(1)      Sec. 6651(a)(2)
     $11,358                   $528.07              $481.13

     Petitioner timely filed a petition with this Court

contesting the deficiency determined in the notice and claiming

an overpayment of $7,733.     She also apparently submitted a return

to respondent seeking a refund of $7,733.     Respondent concedes

that the return submitted is correct but contends that petitioner

is time barred from recovering the $7,733 overpayment by

operation of sections 6511 and 6512(b).

     We generally have jurisdiction to determine the existence

and amount of any overpayment of tax to be credited or refunded

for years that are properly before us.     See sec. 6512(b)(1).

For the taxable year 1994, section 6512(b)(3) (incorporating by

reference section 6511(b)(2)), however, provides that a claim for

credit or refund of an overpayment of tax must be filed by the

taxpayer within 3 years from the time the return was filed or

within 2 years from the time the tax was paid.     If no return is

filed, the claim must be filed within 2 years from the time the

tax was paid.     See Commissioner v. Lundy, 516 U.S. 235, 253

(1996).

     In Commissioner v. Lundy, supra, the Supreme Court held that

where a taxpayer does not file a return prior to the notice of

deficiency being mailed, the Tax Court has jurisdiction to award

a refund only as to those taxes paid during the 2 years preceding
                                 - 4 -

the mailing of the notice of deficiency.    Petitioner’s

overpayment results from withholding credits paid in 1994.

Pursuant to section 6513(b)(1) those credits are deemed paid on

April 15, 1995.    Respondent mailed the notice of deficiency in

this case on December 1, 1998.    None of the taxes withheld for

petitioner’s 1994 tax year were paid within the 2-year period

ending on December 1, 1998.

     Congress amended section 6512(b)(3) in the Taxpayer Relief

Act of 1997, to provide that where a notice of deficiency is

issued within the third year after the due date of the taxpayer’s

return, as extended, and no return was filed, then the Tax Court

has jurisdiction to award a refund as to taxes paid within the 3

years preceding the mailing of the notice of deficiency.    See

Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 1282, 111 Stat.

788, 1037.   However, amended section 6512(b)(3) is applicable to

tax years ending after August 5, 1997.    Furthermore, the notice

of deficiency here was mailed more than 3 years after the due

date of petitioner’s return (October 15, 1995), and none of the

taxes at issue were paid during the 3-year period preceding the

mailing of the notice of deficiency.

     Petitioner argues that she should be given relief under

section 6511(h).    Section 6511(h) was enacted as part of the

Internal Revenue Service Restructuring and Reform Act of 1998

(RRA 1998), Pub. L. 105-206, sec. 3202(a), 112 Stat. 685, 740.
                                - 5 -

Section 6511(h) permits the tolling of the period of limitations

for taxpayers who are “financially disabled”.      Petitioner

maintains that during this period of time she was “financially

disabled”.

     We are willing to assume (but do not decide) that petitioner

would fall within the meaning of “financially disabled.”2

Section 6511(h), however, does “not apply to any claim for credit

or refund which * * * is barred by the operation of any law or

rule of law * * * as of the date of the enactment of this Act

[July 22, 1998].”    RRA 1998, sec. 3202(b), 112 Stat. 741.     As

noted, petitioner’s withholding credits were deemed paid on April

15, 1995.    See sec. 6513(b)(1).   Petitioner did not file her 1994

Federal income tax return before respondent issued a notice of

deficiency, and, therefore, as stated above, under section

6512(b)(3) petitioner’s refund claim was barred by operation of

law as of April 15, 1997.    See Commissioner v. Lundy, supra at

253; see also Hart v. Commissioner, T.C. Memo 1999-186.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                        Decision will be entered

                                under Rule 155.




2
    We note that this may be a very tenuous assumption. During
this period, petitioner owned and managed real estate, paid her
bills, and applied for unemployment compensation.
