                       T.C. Memo. 2001-62



                     UNITED STATES TAX COURT



        NEWTON K. AND KIMBERLY A. MCKOIN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4812-00.                      Filed March 15, 2001.


     Newton K. McKoin, pro se.

     Alan Friday, for respondent.


             MEMORANDUM FINDINGS OF FACT AND OPINION


     ARMEN, Special Trial Judge:     Respondent determined a

deficiency in petitioners’ Federal income tax for the taxable

year 1997 in the amount of $1,950.
                               - 2 -

      After a concession by petitioner Newton K. McKoin,1 the only

issue for decision is whether certain payments made by petitioner

Newton K. McKoin pursuant to an installment payment agreement may

be offset against the deficiency in issue herein.   We hold that

they may not.

                         FINDINGS OF FACT

      Virtually all of the facts have been stipulated, and they

are so found.

      Petitioners resided in D’Iberville, Mississippi, at the time

that their petition was filed with the Court.   References to

petitioner are to Newton K. McKoin.2

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

      Petitioner, an attorney, timely filed a Federal income tax

return, Form 1040, for 1997.   On his return, petitioner reported

income tax in the amount of $2,381 and claimed total payments in

the amount of $6,924.3   Accordingly, petitioner claimed an


      1
        Petitioner Newton K. McKoin does not dispute the
deficiency in income tax determined by respondent.
      2
       Petitioner Kimberly A. McKoin (Mrs. McKoin) did not appear
at trial and did not execute the stipulation of facts.
Accordingly, the Court will dismiss this action as to her
pursuant to respondent’s oral motion to dismiss for lack of
prosecution. See Rule 123(b), Tax Court Rules of Practice and
Procedure. However, decision will be entered against Mrs. McKoin
consistent with the decision entered against petitioner.

      3
       This total consisted of (1) income tax in the amount of
$76 withheld from Mrs. McKoin’s wages and (2) estimated tax paid
by petitioner in the amount of $6,848.
                                - 3 -

overpayment in the amount of $4,543.

     In processing petitioner’s 1997 return, respondent

discovered mathematical or clerical errors that served to

understate petitioner’s reported tax liability, and therefore

overstate petitioner’s overpayment claim, by $118.   After

correction of these errors, the overpayment claim was reduced to

$4,425.

     By notice dated June 1, 1998, respondent advised petitioner

that the overpayment claimed on his 1997 return (corrected as

described above) had been applied to petitioner’s outstanding tax

liability for 1987.

     On February 4, 2000, respondent sent petitioner a notice of

deficiency determining a deficiency in his Federal income tax for

1997 in the amount of $1,950.   The deficiency was based on

respondent’s determination that petitioner had failed to report

on his 1997 return: (1) Gambling income in the amount of $6,800,

(2) interest income in the amount of $315, and (3) taxable Social

Security benefits in the amount of $5,878.

     Shortly after respondent sent the notice of deficiency,

petitioner submitted Form 1040X, Amended U.S. Individual Income

Tax Return, for 1997.   In the Form 1040X, petitioner admitted

that he had failed to report the amounts determined by respondent

in the notice of deficiency and that his total income tax

liability for 1997 was $4,451, an amount consistent with
                                - 4 -

respondent’s overall determination.      Further, in the Form 1040X,

petitioner claimed an overpayment in the amount of $2,373, which

he calculated by subtracting total tax of $4,451 from total

payments of $6,924.4

B. Petitioner’s Tax Liabilities for 1983 Through 1990

     Prior to 1992, petitioner entered into an installment

payment agreement with respondent.      This agreement, which was

memorialized using Form 433-D, Installment Agreement, pertained

to income taxes owed by petitioner for the taxable years 1983

through 1990 in the amount of approximately $59,300.      The

agreement has remained in effect continuously through the date of

submission of this case.

     As originally executed, the Installment Agreement obligated

petitioner to pay 10 percent of his monthly gross receipts to

respondent.   In or about 1992, the agreement was amended to

obligate petitioner to pay 20 percent of his monthly gross

receipts to respondent.    The agreement provides that amounts paid

by petitioner will “be applied to current year’s estimated tax.”

     The Installment Agreement includes a number of conditions.

Among these conditions are the following three:

     All Federal taxes that become due during the term of
     this agreement must be paid on time.

     Any Federal or State refunds that might otherwise be


     4
       Mathematically, the amount of the claimed overpayment
should have been $2,473.
                               - 5 -

     .due will be applied to this liability until it is
     satisfied.

     If the Conditions of this Installment Agreement are not
     met, it will be terminated and the entire tax liability
     may be collected by levy on income, bank accounts, or
     any other assets, or by seizure of property.


                              OPINION

     Petitioner concedes that there is a deficiency in his income

tax for 1997 as determined by respondent in the notice of

deficiency.   However, petitioner contends that he does not owe

the deficiency because he previously paid it.   In this regard,

petitioner relies on language in the Installment Agreement that

obligates him to pay 20 percent of his monthly gross receipts to

respondent “to be applied to current year’s estimated tax.”

Petitioner construes this language to mean that current year

payments made pursuant to the Installment Agreement are allocable

to current year tax liability, regardless of when such liability

may ultimately be determined, and only then may any excess be

applied to an outstanding liability for some other year.

     We disagree with petitioner’s interpretation of the

Installment Agreement.   In our view, petitioner’s interpretation

is strained, if not unreasonable, and subverts the statutorily

established estimated tax payment procedure.

     The Installment Agreement expressly requires that “All

Federal taxes that become due during the term of this agreement

must be paid on time.”   Towards that end, the agreement obligates
                               - 6 -

petitioner to pay 20 percent of his monthly gross receipts to

respondent to “be applied to current year’s estimated tax.”

Payment of estimated tax by a taxpayer constitutes payment on

account of the taxpayer’s current year tax liability as reported

by the taxpayer on the taxpayer’s return.   Sec. 6315; see sec.

6654.5   See also In re Ripley, 926 F.2d 440, 441-442 (5th Cir.

1991), for a brief, general discussion of the estimated tax

payment procedure.   Once such reported liability is paid, any

excess payment constitutes an overpayment, which may be refunded

to the taxpayer or applied by the Commissioner to any outstanding

liability owed by the taxpayer.   See sec. 6402.   In this regard,

the Installment Agreement expressly authorizes respondent to

apply any refund that might otherwise be payable to any

outstanding liability covered by the agreement.

     Here, petitioner made payments pursuant to the Installment

Agreement in 1997 that respondent properly treated as payments of

estimated tax for 1997.   Petitioner then filed his 1997 return

and claimed an overpayment because estimated tax payments (plus

withheld income tax) exceeded his reported tax liability.

Respondent allowed the claim (after adjusting the amount to

correct for certain mathematical or clerical errors made by

petitioner).   Then, acting pursuant to section 6402, respondent



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

applied the overpayment to petitioner’s outstanding liability for

1987.    Respondent’s actions were fully consistent with the

Installment Agreement, 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).

     In view of the foregoing, we hold for respondent.6

     In order to give effect to our disposition of the disputed

issue, as well as petitioner’s concession and respondent’s oral

motion to dismiss for lack of prosecution as to petitioner

Kimberly A. McKoin,



                                An appropriate order of dismissal

                           and decision will be entered.




     6
       In so holding, we are mindful of sec. 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).
