                        T.C. Memo. 1999-311



                      UNITED STATES TAX COURT



               ELLIOT G. STEINBERG, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 44873-85.               Filed September 21, 1999.


     Walter F. Spath III, for petitioner.

     John J. Comeau, for respondent.



                        MEMORANDUM OPINION

     DAWSON, Judge:   This case was assigned to Special Trial

Judge D. Irvin Couvillion pursuant to Rules 180, 181, and 183.1

The Court agrees with and adopts the opinion of the Special Trial

Judge, which is set forth below.




     1
          All Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 2 -


                 OPINION OF THE SPECIAL TRIAL JUDGE

     COUVILLION, Special Trial Judge:    The matter before the

Court is an order to petitioner to show cause why a decision

should not be entered in this case in accordance with an

agreement of the parties with respect to the deficiencies in tax,

the additions to tax, and the increased interest under section

6621(c).2

     In a notice of deficiency, respondent determined the

following deficiencies and additions to tax with respect to

petitioner's 1980 and 1981 tax years:


                                          Addition to Tax
     Year             Deficiency            Sec. 6653(a)
     1980             $364,191.06             $18,210
     1981              334,735.66              16,7371
            1
             For 1981, the addition to tax is under sec.
             6653(a)(1) for the amount shown, plus, under
             sec. 6653(a)(2), 50% of the underpayment
             attributable to negligence or intentional
             disregard of rules or regulations.


In addition, respondent determined that the underpayments for

each year were substantial underpayments attributable to tax-

motivated transactions, and, accordingly, such underpayments were

subject to the increased rate of interest under section 6621(c).




     2
          Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the years at issue.
                               - 3 -


     A petition was filed timely challenging all of respondent's

determinations.   No overpayments of tax were alleged in the

pleadings.   The case has never proceeded to trial.   Two

stipulations of settled issues have been filed by the parties.

One of the stipulations includes an agreement by the parties to

be bound by the outcome of a then pending case.   The decision in

that case has since become final.   The other stipulation resolves

all of the other issues in the present case.

     Petitioner was a resident of California when the petition

was filed.

     The parties agree that, in accordance with the stipulations

of settled issues, the deficiencies in tax are $297,478 and

$168,178, respectively, for 1980 and 1981; there is no addition

to tax due from petitioner for 1980 under section 6653(a); there

is no addition to tax due from petitioner for 1981 under section

6653(a)(1) and (2); and, for the years 1980 and 1981, $295,309

and $167,178, respectively, are substantial underpayments

attributable to tax-motivated transactions and thus subject to

increased interest under section 6621(c).   The parties do not now

question these amounts.

     At issue is whether this Court has jurisdiction to apply, to

petitioner's 1980 tax year, the portion of an overpayment by

petitioner for his 1973 tax year that respondent applied to an

unpaid assessed tax liability for petitioner's 1975 tax year.
                               - 4 -


     On November 4, 1988, this Court entered stipulated decisions

in docket Nos. 7886-77 and 9957-78 indicating that petitioner had

overpayments in income tax in the amounts of $101,286 and $4,649,

respectively, for 1973 and 1974.   In December 1988, respondent

mailed a check to petitioner in the amount of $152,624.35 for the

overpayment in tax plus interest for the 1973 tax year.3    The

record does not indicate whether a check was sent to petitioner

for his 1974 overpayment, nor is there any question before the

Court with respect to the 1974 overpayment.   Petitioner neither

endorsed nor negotiated the $152,624.35 check.   In a letter dated

December 21, 1988, counsel for petitioner returned the check to

respondent.   The letter requested that "the overpayments be

reapplied by the IRS to those years for which deficiencies either

have been proposed or assessed, per the following instructions."

The letter then provided instructions as to how petitioner wanted

the overpayments to be applied among several tax years.

Particularly, the letter directed that $67,078 of the 1973

overpayment be applied to petitioner's 1980 tax year, one of the

years before the Court in this case.

     Respondent did not follow petitioner's instructions.

Respondent did not reissue a refund check.    Instead, respondent


     3
          The documentation submitted by the parties differs with
respect to the date the check was issued and whether or not the
check also included the overpayment for 1974. These differences
are not material to the question before the Court.
                                - 5 -


credited the overpayments from 1973 and 1974 to petitioner's tax

liability for 1975 (the 1975 liability).     Petitioner was not

immediately informed of this action.

     Petitioner's case here, involving his 1980 and 1981 tax

years, was settled as noted above.      In February 1994, respondent

prepared a stipulated decision to reflect the parties' agreement

and sent it to petitioner for his execution.     Sometime during

this process, petitioner raised questions regarding the

application of the 1973 overpayment to his 1980 tax year as he

had earlier requested.

     By letter dated September 28, 1995, respondent advised that

petitioner's December 1988 letter requesting application of

petitioner's overpayments contained errors in calculation and

informed petitioner's counsel that, because of those errors, IRS

had applied the overpayment to petitioner's 1975 tax liability as

well as to other years.   Petitioner, through counsel, responded

in a letter dated June 21, 1996, that the December 1988 letter

did not contain any errors in calculation and requested that IRS

apply the overpayments in accordance with petitioner's request.

Respondent declined to do so.   Petitioner declined to execute the

proposed stipulated decision prepared by respondent for this case

and, instead, prepared a stipulated decision that he forwarded to

respondent.   The document prepared by petitioner recited the same

provisions contained in respondent's stipulated decision with
                                - 6 -


respect to the deficiencies, additions to tax, and increased

interest but contained a paragraph that $67,078 had been paid on

December 21, 1988, on the deficiency for 1980, which amount was

not reflected in the agreed deficiency for 1980.

     Respondent informed petitioner by letter dated February 22,

1998, that respondent did not agree with the added stipulation

and would not sign the decision document prepared by petitioner.

On October 9, 1998, petitioner filed a motion characterized as a

"Motion to Compel Computation for Entry of Decision Pursuant to

Rule 155."    By Order dated October 15, 1998, the Court filed

petitioner's motion as a "Motion to Compel Computation for Entry

of Decision" because no opinion had been issued in this case.

Respondent was ordered to file with the Court a written response

to petitioner's motion.

     Respondent filed a response to petitioner's motion.    Based

upon this response, which recited the above facts, the Court

denied petitioner's motion to compel computation for entry of

decision.    Further, the Court ordered petitioner to show cause

why a decision should not be entered in this case in accordance

with the decision document prepared by respondent, since there is

no dispute with respect to the deficiencies in tax, additions to

tax, and increased interest for the 1980 and 1981 tax years.

     In his response to the show cause order, petitioner requests

that the Court enter a decision in the form he prepared or,
                               - 7 -


alternatively, that the Court enter a decision in the form

prepared by respondent but also separately order respondent to

apply $67,078 of petitioner's 1973 overpayment to petitioner's

1980 tax deficiency.

     This Court is a court of limited jurisdiction; accordingly,

the Court may only exercise jurisdiction to the extent expressly

permitted or provided by statute.   See Trost v. Commissioner, 95

T.C. 560, 565 (1990); Judge v. Commissioner, 88 T.C. 1175, 1180-

1181 (1987).   Thus, this Court has jurisdiction to redetermine a

deficiency if a notice of deficiency is issued by the

Commissioner and if a petition is filed timely by the taxpayer.

See Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27

(1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988).

     Respondent issued a valid notice of deficiency, and

petitioner filed a timely petition; therefore, this Court has

jurisdiction to redetermine the deficiency or to determine an

overpayment for each of the years at issue.   The parties have

agreed to the amounts of the deficiencies, the additions to tax,

and increased interest.   Petitioner has not and does not now

claim an overpayment for either year at issue.   Instead,

petitioner contends that his return of the refund check was a

deposit in the nature of a cash bond to be applied or credited to

his 1980 tax liability, and that respondent did not properly

apply the deposit in accordance with petitioner's instructions in
                                 - 8 -


his December 1988 letter in which the refund check was returned.

Petitioner asks the Court to enter a decision in the form he

prepared, or, alternatively, that the Court enter a decision in

the form prepared by respondent but separately order respondent

to apply $67,078 of petitioner's 1973 overpayment to petitioner's

1980 deficiency.

     Petitioner contends this Court has jurisdiction to order the

application of petitioner's 1973 overpayment to the 1980 tax

liability if the return of the refund check in 1988 was in the

nature of a cash bond, rather than a payment of tax, relying on

Risman v. Commissioner, 100 T.C. 191 (1993); Perkins v.

Commissioner, 92 T.C. 749 (1989); and Shubert v. Commissioner, 41

T.C. 243 (1963).

     Under section 6402, the Commissioner is expressly authorized

to credit the amount of an overpayment against any tax liability

of the taxpayer.   See sec. 6402(a).     Section 6512(b) generally

defines this Court's jurisdiction to determine overpayments.

Paragraph (4) of that section serves to deny jurisdiction to this

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

Secretary under section 6402."    See sec. 6512(b)(4).4



     4
           Sec. 6512(b)(4) was added by the Taxpayer Relief Act of
1997 (TRA 1997), Pub. L. 105-34, sec. 1451(b), 111 Stat. 788,
1054. Sec. 6512(b)(4) became effective on Aug. 5, 1997, see TRA
1997 sec. 1451(c), 111 Stat. 1054, and is therefore applicable to
this case.
                                - 9 -


     Pursuant to the authority conferred by section 6402(a),

respondent credited $67,078 of the overpayment by petitioner of

his 1973 taxes against his assessed and unpaid tax liability for

1975.   Petitioner contends that respondent did not apply the

overpayment according to his instructions in the December 1988

letter.   However, section 6512(b)(4) clearly restricts the

jurisdiction of this Court to decide that matter because that

would constitute a review of a credit made under section 6402.

     Our holding in this case is consistent with our holding in

Winn-Dixie Stores, Inc. v. Commissioner, 110 T.C. 291 (1998).     In

that case, the taxpayer agreed to the Commissioner's

determination for certain years before the Court (the present

years' underpayments).   The Commissioner and the taxpayer also

agreed as to the overpayments for certain years not before the

Court (the prior years' overpayments).   The taxpayer requested

that the Commissioner offset the prior years' overpayments

against the present years' underpayments.    However, the

Commissioner refunded to the taxpayer the prior years'

overpayments, including interest thereon calculated at the

overpayment rate under section 6621(a)(1).    The Commissioner

later mailed notices of tax due, including interest calculated at

the underpayment rate under section 6621(a)(2) and (c), for the

present years' underpayments.   The taxpayer paid the present

years' underpayments, together with interest at the underpayment
                               - 10 -


rate.    The taxpayer in the case pending before this Court for the

present years then claimed that the Commissioner's failure to

offset, pursuant to section 6402(a), caused the taxpayer to

overpay interest for the years before the Court (the present

years' overpayments).5

     The issue in Winn-Dixie Stores, Inc. was whether the

Commissioner abused his authority by failing to offset the prior

years' overpayments against the present years' underpayments.

The Commissioner argued that, pursuant to section 6512(b)(4),

this Court did not have jurisdiction to decide that matter.

     The Court agreed that, under section 6512(b)(4), the Court

does not have authority to restrain or review any credit or

reduction made by the Commissioner under section 6402.    However,

the Court held that, under section 6512(b)(1), this Court has

jurisdiction to find that there is a deficiency in tax, or to

find that there is no deficiency in tax, and, in either

situation, the Court has jurisdiction to determine whether there

has been an overpayment.   The Court further pointed out that, in

connection with a deficiency determination, the amount of


     5
          Interest on the present years' underpayments was
affected because there is no net interest due for the period of
mutual indebtedness if the Commissioner exercises his authority
to offset under sec. 6402(a). See sec. 6601(f). However, there
is net interest due if there is no offset. Net interest results
in this instance because the rate for calculating interest on
overpayments is less than the rate for calculating interest on
underpayments. See sec. 6621(a).
                              - 11 -


interest paid can be determined as part of the overpayment

because section 6601(e)(1) provides that interest shall be

treated as a tax.   In Winn-Dixie Stores, Inc., the taxpayer had

made payments of the tax deficiencies for the years before the

Court as well as the interest on such deficiencies.    The taxpayer

claimed an overpayment of that interest.    The Court held that the

claim fell within its jurisdiction to determine an overpayment.

     In this case, there is no deficiency at issue, nor is there

a claim of overpayment by petitioner for the years 1980 and 1981.

Petitioner claims that an overpayment for a year not before the

Court, 1973, should be credited to the deficiency for the 1980

year before the Court.   The relief petitioner seeks is nothing

more than a request for the review of a credit by the

Commissioner under section 6402.   It is not a request for the

recovery of an overpayment for the year 1980.    Accordingly, this

Court has no jurisdiction to consider the relief petitioner

seeks.   See Savage v. Commissioner, 112 T.C. 46 (1999).

     Therefore, we hold that the Court has no jurisdiction to

order respondent to credit petitioner's 1980 deficiency with that

portion of the 1973 overpayment requested by petitioner.



                                           An appropriate order and

                                    decision will be entered.
