                        T.C. Memo. 2001-101



                      UNITED STATES TAX COURT



             ROBERT WILLIS BARKLEY, SR., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18648-99.                     Filed April 26, 2001.


     Robert Willis Barkley, Sr., pro se.

     Mary Kay McIlyar, for respondent.


              MEMORANDUM FINDINGS OF FACT AND OPINION


     ARMEN, Special Trial Judge:   Respondent determined a

deficiency in petitioner’s Federal income tax for the taxable

year 1997 in the amount of $994.

     After concessions by the parties,1 the issue for decision is

whether respondent erred in crediting an overpayment claimed by



     1
         The parties’ concessions are described infra in the text.
                               - 2 -

petitioner on his 1997 return against an outstanding liability

owed by him for 1988.   We hold that respondent did not err.

                         FINDINGS OF FACT

      Some of the facts have been stipulated, and they are so

found.

      Petitioner resided in Gunter, Texas, at the time that his

petition was filed with the Court.

A.   Petitioner’s Tax Return for the Year in Issue

      Petitioner timely filed a Federal income tax return, Form

1040A, for 1997.   On his return, petitioner claimed a credit for

child and dependent care expenses (the childcare credit) in the

amount of $960.

      In support of the childcare credit, petitioner attached to

his return Schedule 2, Child and Dependent Care Expenses for Form

1040A Filers.   In filling out Schedule 2, petitioner mistakenly

failed to complete Part III, Dependent Care Benefits.   As a

consequence, the amount of the childcare credit that petitioner

claimed on Schedule 2 was overstated.   This resulted in

petitioner's claiming an overpayment of tax on his return in the

amount of $694.2




      2
        If petitioner had filled out Schedule 2 correctly, a
childcare credit in the amount of $251 would have been indicated.
This would have resulted in petitioner reporting a balance due of
$15 on his return.
                                - 3 -

      Respondent’s service center processed petitioner’s return as

though petitioner were entitled to the amount of the childcare

credit claimed by him on Schedule 2.

B.   Disposition of the Claimed Overpayment

      At the time that petitioner filed his 1997 return, he was

liable for unpaid income taxes for 1988 and 1989.   Accordingly,

in May 1998, respondent credited the $694 overpayment claimed by

petitioner on his 1997 return against his 1988 liability.3

C.   Petitioner’s Offer in Compromise

      On or about February 24, 1998, petitioner submitted an offer

in compromise, Form 656, seeking to compromise his outstanding

income tax liabilities for 1988 and 1989 in exchange for (1) the

payment of a fixed amount of money and (2) agreeing to various

terms and conditions.   Respondent accepted petitioner’s offer in

compromise on or about July 24, 1998.

      Paragraphs (g) and (j) of the offer in compromise provided

in pertinent part as follows:

      (g) The IRS will keep any refund, including interest,
      due to me/us because of overpayment of any tax or other
      liability, for tax periods extending through the
      calendar year that the IRS accepts the offer.[4] * * *


      3
        So stipulated. Although the bookkeeping entries may have
been made in May 1998, the transcripts of account for both the
overpayment year (1997) and the liability year (1988) indicate
that the credit was effective April 15, 1998.
      4
        Read literally, paragraph (g) would appear to entitle
respondent to “keep” a taxpayer’s refund even if the amount
thereof exceeded the taxpayer’s total outstanding liability that
                                                   (continued...)
                               - 4 -


      (j) I/we understand that I/we remain responsible for
      the full amount of the tax liability, unless and until
      the IRS accepts the offer in writing and I/we have met
      all the terms and conditions of the offer. The IRS
      will not remove the original amount of the tax
      liability from its records until I/we have met all the
      terms of the offer.

D.   Examination of Petitioner’s 1997 Return

      Sometime after respondent accepted petitioner’s offer in

compromise, respondent commenced an examination of petitioner’s

income tax return for 1997.   The examination culminated in the

issuance of the notice of deficiency in September 1999 from which

petitioner appealed to this Court.

E.   Respondent’s Concession and Contention

      Respondent concedes that the deficiency as determined in the

notice of deficiency is overstated and that the correct amount of

the deficiency is $709.   In this regard, respondent contends that

the deficiency is equivalent to the difference between the

childcare credit claimed by petitioner on his return (and allowed

by respondent’s service center in processing petitioner’s return)

and the childcare credit to which petitioner is entitled, as

shown by the following:


          Childcare credit claimed             $960
          Less: allowable childcare credit     -251
          Deficiency                            709


      4
      (...continued)
was the subject of an offer in compromise. The facts in the
present case do not, however, require that we decide this matter.
                               - 5 -

F.   Petitioner’s Concessions and Contentions

      Petitioner concedes that he mistakenly failed to complete

Part III of Schedule 2, Child and Dependent Care Expenses for

Form 1040A Filers, and that, as a consequence, the amount of the

childcare credit shown on Schedule 2 was overstated.      Petitioner

also concedes (and respondent agrees) that the amount of the

childcare credit to which he is entitled is $251.      Finally,

petitioner concedes that instead of claiming a $694 overpayment

on his return, he should have reported a balance due of $15, as

shown by the following:


          Childcare credit claimed              $960
          Less: allowable childcare credit      -251
          Excess childcare credit claimed        709
          Less: overpayment claimed per
                return as filed                 -694
          Balance due                             15


      Petitioner contends that respondent should not have credited

the $694 overpayment claimed on his 1997 return to his tax

liability for 1988 because, he contends, respondent’s acceptance

of the offer in compromise conclusively resolved his tax

liability for 1988.   Thus, petitioner contends, the $694

overpayment remained available to offset all but $15 of the

excess childcare credit ($709) to which he is admittedly not

entitled.
                                 - 6 -

                             OPINION

     We agree with petitioner that he should not have claimed a

$694 overpayment on his 1997 return but rather should have

reported a balance due of $15.    However, we decide issues by

judging what actually happened and not by what should have

happened. See Commissioner v. National Alfalfa Dehydrating &

Milling Co., 417 U.S. 134, 148-149 (1974).

     The undisputed facts in this case demonstrate that

petitioner claimed a $694 overpayment on his 1997 return and that

respondent credited the overpayment against an outstanding income

tax liability owed by petitioner for 1988.

     We reject petitioner’s contention that respondent should not

have credited the 1997 overpayment against the 1988 liability.

Respondent’s action was taken pursuant to statutory authority

conferred by section 6402(a).5     That section provides in

relevant part as follows:

          (a)General Rule.--In the case of any overpayment,
     the Secretary * * * may credit the amount of such
     overpayment * * * against any liability in respect of
     any internal revenue tax on the part of the person who
     made the overpayment * * * .

     At the time that petitioner filed his 1997 return and

claimed an overpayment, he owed tax for 1988.    At the time that

respondent credited the claimed overpayment against the

outstanding liability, no contractual or other limitation

     5
        All section references are to the Internal Revenue Code
in effect for 1997, the taxable year in issue.
                               - 7 -

constrained respondent’s authority to take such action.

Respondent was therefore fully justified in crediting

petitioner’s 1997 overpayment against petitioner’s 1988

liability.

     We also reject petitioner’s contention that respondent’s

acceptance of the offer in compromise served to invalidate

respondent’s prior action in crediting the 1997 overpayment

against the 1988 liability.   In order to induce respondent to

accept the offer in compromise, petitioner agreed not only to pay

a fixed amount of money, but also to forgo any refund

attributable to an overpayment of tax for any taxable year

through 1998.   Thus, the premise for petitioner’s contention;

i.e., that the mere payment of the fixed amount of money upon

submission of the offer in compromise “wiped the slate clean”

insofar as his 1988 tax liability was concerned, is fatally

flawed.6




     6
        We remind petitioner that under paragraph (j) of the
offer in compromise he remained liable for the full amount of the
liabilities for 1988 and 1989 unless and until respondent
accepted the offer and he “met all the terms and conditions of
the offer.” As spelled out in paragraph (g) of the offer in
compromise, one of those terms and conditions was his agreement
to forgo any refund attributable to an overpayment of tax for any
taxable year through 1998.
                              - 8 -

     In conclusion, we hold that respondent’s action in crediting

the 1997 overpayment against the 1988 liability was fully

consistent with the offer in compromise, as well as with

operative provisions of statutory law.    See Terry v.

Commissioner, 91 T.C. 85, 87 (1988) (after applying an

overpayment to a taxpayer’s liability for another taxable year,

the Commissioner is not precluded from subsequently determining a

deficiency for the taxable year in respect of which the

overpayment was originally claimed and allowed); see also McKoin

v. Commissioner, T.C. Memo. 2001-62.     In so holding, we are

mindful of section 6512(b)(4), which serves to deny jurisdiction

to the Court "to restrain or review any credit or reduction made

by the Secretary under section 6402."     Savage v. Commissioner,

112 T.C. 46, 49 (1999).

     We have carefully considered remaining arguments made by

petitioner for a result contrary to that expressed herein, and,

to the extent not discussed above, we consider those arguments to

be without merit.7




     7
        We specifically note that the absence of any reference to
the $694 credit on certain IRS mailings that petitioner received
in May and June 1998 does not mean that respondent never credited
petitioner with the 1997 overpayment. Transcripts of account for
the relevant years clearly demonstrate that respondent credited
the 1997 overpayment to the 1988 liability.
                              - 9 -

     In order to give effect to our disposition of the disputed

issue, as well as the parties’ concessions,



                                      Decision will be entered for

                              respondent in the amount of the

                              reduced deficiency of $709.
