                         T.C. Memo. 1997-567



                       UNITED STATES TAX COURT



                    JAMES E. BROWN, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket No. 10823-95.            Filed December 23, 1997.



       James E. Brown, pro se.

       Rebecca Dance Harris, for respondent.



                         MEMORANDUM OPINION


       PARR, Judge:   Respondent determined deficiencies in, an

addition to, and a penalty on, petitioner's Federal income taxes

as follows:

                                  Additions to Tax     Penalties
Year             Deficiency           Sec. 6651        Sec. 6662
1990               $44,086             $3,799             $330
1991               $26,406               --                --
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     All section references are to the Internal Revenue Code in

effect for the taxable years in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure, unless

otherwise indicated.

     After a concession1, the issues for decision are:2 (1)

Whether the theory of judicial estoppel, or in the alternative,

the period of limitations, bars the assessment and collection of

the deficiency in income tax for 1990.    We hold it does not.     (2)

Whether petitioner's backpay award of $137,918.96 received in

1990 as partial settlement of his claim under Title VII of the

Civil Rights Act of 1964, Pub. L. 88-352, 78 Stat. 253, is

taxable.   We hold it is.   (3) Whether petitioner is entitled to

an overpayment based on his claim to additional withholding

credits of $47,277 for 1991.    We hold he is not.   (4) Whether

petitioner is entitled to deduct unreimbursed employee business

expenses of $8,044 and $5,457 for 1990 and 1991, respectively.

We hold he is not.   (5) Whether for 1990 petitioner is liable for

an addition to tax for failure to file a return under section

6651(a).   We hold he is.   (6) Whether for 1990 petitioner is




     1
          Respondent concedes that petitioner did not have
unreported income of $81,669 in 1991.
     2
          Petitioner raises several issues at trial and on brief
which we find to be without merit. Accordingly, we do not
address them here.
                                 - 3 -


liable for an accuracy-related penalty for negligence under

section 6662.   We hold he is.

     Some of the facts have been stipulated and are so found.

The stipulated facts and the accompanying exhibits are

incorporated into our findings by this reference.     At the time

the petition in this case was filed, petitioner's legal residence

was Whites Creek, Tennessee.

General Background

     Petitioner is a civilian employee of the U.S. Department of

the Army (the Army).   On May 8, 1980, petitioner initiated a

lawsuit in the U.S. District Court for the District of Columbia

(the District Court) against the Secretary of the Army alleging,

among other things, that he was discriminated against by the Army

in violation of Title VII of the Civil Rights Act of 1964 (the

Title VII claim) when he was denied certain promotions.

     On May 12, 1988, the District Court granted petitioner's

motion for partial summary judgment on the issue of the Army's

liability under the Title VII claim.     On May 11, 1989, the

District Court entered an order granting petitioner certain

backpay awards in accordance with its May 12, 1988 decision.     In

accordance with the May 11, 1989 order of the District Court,

petitioner received an interim gross pay award of $137,918.96

during 1990.
                               - 4 -


     On his Federal income tax return for 1990, petitioner

reported that he received an award based on the Title VII claim,

but assumed the position that it was not taxable.    Petitioner's

1990 return was first received at respondent's Brookhaven Service

Center on July 1, 1992 and forwarded to the Philadelphia Service

Center for processing.   A second return for 1990, which

respondent treated as an amended return, was received on July 6,

1992 at the Philadelphia Service Center.   In September 1992

petitioner received a refund of $30,045.66 for 1990.

     Respondent then received an information item for 1991

indicating that a Form W-2 was issued to petitioner by the

District Court.   The Form W-2 indicated that for 1991 petitioner

had received additional income of $81,669 and withholding credits

of $47,277 in further satisfaction of the Title VII claim.     Upon

further review, however, the Form W-2 was found not to be a bona

fide document, and the parties agreed that petitioner did not

receive an additional $81,669 of income.

     On April 7, 1994, petitioner filed a complaint in the U.S.

Court of Federal Claims (the Court of Federal Claims) seeking to

recover the amount allegedly paid to him in 1991 and the amount

allegedly withheld for that year.   On May 12, 1995, after

petitioner filed suit in the Court of Federal Claims, respondent

issued the notice of deficiency for 1990 and 1991.   In response

to the notice of deficiency, petitioner filed a petition with the
                                - 5 -


Court, thus vesting the Court with jurisdiction over the case.

See Brown v. Commissioner, T.C. Memo. 1996-100.

Issue 1.    Period of Limitations

     Respondent determined a deficiency in petitioner's income

tax of $44,086 for 1990.    Petitioner asserts that respondent is

precluded from assessing this deficiency by the theory of

judicial estoppel, or in the alternative, by the expiration of

the period of limitations.

     We are not persuaded by petitioner's arguments.   The

doctrine of judicial estoppel, petitioner argues, operates to

preclude a party from asserting a position in legal proceedings

which is contrary to a position it has already asserted in

another proceeding.    See Teledyne Indus., Inc. v. NLRB, 911 F.2d

1214, 1217-1220 (6th Cir. 1990).

     Petitioner maintains that in proceedings before the Court of

Federal Claims the Government conceded that the statute of

limitations barred any assessment of a deficiency for 1990.

Petitioner claims that the Government asserted this as a basis

for having his suit before the Court of Federal Claims dismissed,

and is now prohibited from asserting a contrary position before

the Court.

     At trial, respondent denied that the Government made such a

concession during the proceedings before the Court of Federal

Claims.    In support of his contention, petitioner introduced at
                                - 6 -


trial a portion of the Government's brief from the case before

the Court of Federal Claims.    The brief made no such concession.

On brief, petitioner cites the opinion of the Court of Federal

Claims to establish this same point.    In no conceivable way does

the opinion of the Court of Federal Claims support petitioner's

position.   See Brown v. United States, Nos. 94-227C & 94-358C at

4-5 (Fed. Cl. Feb. 22, 1996).   Accordingly, respondent is not

judicially estopped from assessing the deficiency for 1990.

     In the alternative, petitioner argues that respondent is

precluded from asserting a deficiency for 1990 by the statute of

limitations.   At trial, petitioner referred on occasion to the

"2-year" statute of limitations.   We addressed the distinction

between the statutes of limitations for deficiency proceedings

and suits for the recovery of erroneous refunds in our previous

opinion denying petitioner's motion for summary judgment, Brown

v. Commissioner, T.C. Memo. 1996-100.

     A suit for the recovery of an erroneous refund under section

7405 is merely one of several remedies open to the Government in

such a situation.   Krieger v. Commissioner, 64 T.C. 214, 216

(1975).   It is a civil action brought in the name of the United

States and does not preclude an alternative remedy; namely, the

determination of a deficiency by the Commissioner.    Id.   It has

been firmly established in our tax law that the Commissioner may

proceed through the deficiency route where there has been an
                                 - 7 -


erroneous refund as in this case.        Pesch v. Commissioner, 78 T.C.

100, 120 (1982); Krieger v. Commissioner, supra; Beer v.

Commissioner, T.C. Memo. 1982-735, affd. 733 F.2d 435 (6th Cir.

1984); see also Burnet v. Porter, 283 U.S. 230 (1931); Miller v.

Commissioner, 23 T.C. 565 (1954), affd. 231 F.2d 8 (5th Cir.

1956); H. Rept. 849, 79th Cong., 1st Sess. (1945), 1945 C.B. 566,

583.    When the Commissioner resorts to the deficiency procedure,

it is clear that the period of limitations applicable to such

course of action, i.e., section 6501, is controlling rather than

the 2-year period applicable to suits for the recovery of

erroneous refunds.     Pesch v. Commissioner, supra; Krieger v.

Commissioner, supra.

       This case is before the Court pursuant to the issuance of a

notice of deficiency by respondent and petitioner's timely filing

of a petition.    Under the general rule of section 6501(a), a

deficiency must be assessed within 3 years from the date on which

the return is filed.    The notice of deficiency was issued on May

12, 1995.    Respondent determined that petitioner filed his 1990

return on July 1, 1992.    Petitioner asserts that he filed his

1990 return on June 6, 1991.    The statute of limitations,

therefore, turns on when the return is deemed filed.

       Filing, generally, "is not complete until the document is

delivered and received."     United States v. Lombardo, 241 U.S. 73,

76 (1916).    This general presumption, however, is modified by
                               - 8 -


section 7502.   Section 7502(a)(1) provides that if a document is

delivered to the Internal Revenue Service (IRS) at the proper

address after its due date by U.S. mail, then in certain

circumstances the date of postmark shall be the date of delivery.

Section 7502(c) and accompanying regulations provide that use of

registered mail or certified mail provides prima facie evidence

that the document was delivered, and that the date of

registration or the date of the U.S. postmark on the certified

mail receipt is the postmark date.     Here, petitioner has not

offered any evidence of postmark.    In addition, petitioner did

not take the added and, in this case, necessary precaution of

having it sent by registered or certified mail.3

     Notwithstanding section 7502, when a taxpayer does not have

documentary evidence that a form was mailed, we, and certain

other federal courts, have in particular circumstances allowed

indirect evidence to prove that the form was mailed.     See Estate

of Wood v. Commissioner, 92 T.C. 793 (1989), affd. 909 F.2d 1155

(8th Cir. 1990); see also Anderson v. United States, 966 F.2d 487

(9th Cir. 1992).   It is well settled that pursuant to the common

law mailbox rule, proper mailing of an envelope creates a

rebuttable presumption of receipt.     Rosenthal v. Walker, 111 U.S.


     3
          Petitioner did provide a certified mail receipt dated
June 23, 1992, for a document sent to the IRS in Philadelphia,
Pennsylvania, a year later than petitioner claims he filed his
original return.
                              - 9 -


185, 193-194 (1884); Smith v. Commissioner, T.C. Memo. 1994-270,

affd. without published opinion 81 F.3d 170 (9th Cir 1996).

Whether the Commissioner is able to rebut such presumption of

receipt is a credibility determination.    Smith v. Commissioner,

supra (citing Anderson v. United States, supra at 492).    We need

not make such a credibility determination here.4

     The Court of Appeals for the Sixth Circuit, to which this

case is appealable, has consistently rejected "testimony or other

evidence as proof of the actual date of mailing."    Miller v.

United States, 784 F.2d 728, 731 (6th Cir. 1986)(quoting Deutsch

v. Commissioner, 599 F.2d 44, 46 (2d Cir. 1979)).    The Court of

Appeals for the Sixth Circuit "[concluded] that the only

exceptions to the physical delivery rule available to taxpayers

are the two set out in section 7502".     Miller v. United States,

supra at 731.

     This issue was revisited in Surowka v. United States, 909

F.2d 148, 150 (6th Cir. 1990), where the Court of Appeals stated:



     4
          Even if we were required to make such a determination,
we note that petitioner's case is distinguishable from those
which allowed extrinsic evidence as proof of the date of mailing.
In Estate of Wood v. Commissioner, 92 T.C. 793 (1989), affd. 909
F.2d 1155 (8th Cir. 1990), for example, the taxpayer provided
testimony from the local postmaster as to the date she hand-
postmarked the item. Petitioner does not provide such evidence
here. In rebuttal, however, respondent provided credible
testimony from an employee regarding standard IRS procedures, and
a nationwide search on respondent's computer system determined no
return was received from petitioner prior to July 1, 1992.
                                   - 10 -


                 Plaintiffs argue that the recent tax
           court    decision  in  Estate   of  Wood   v.
           Commissioner of Internal Revenue, 92 T.C. 793
           (1989) allows them to prove timely filing of
           their return by extrinsic evidence.        We
           disagree.

                First, the tax court in Wood, unlike this
           court in Miller, found the judicially-created
           presumption, that proof of a properly mailed
           document is received, applied in section 7502
           cases.   92 T.C. 798-99.     Further, the tax
           court's holding in Wood that section 7502(c)
           creates a "safe harbor" for taxpayers who file
           by registered or certified mail was rejected
           by this court in Miller, 784 F.2d at 731.
           More importantly, the tax court in Bruder v.
           Commissioner, 57 T.C.M. 873 (1989), held that
           Wood's presumption of delivery did not apply
           to cases appealable to the Sixth Circuit
           because, in Miller, the Sixth Circuit rejected
           the applicability of any such presumption and
           held that section 7502 creates the only
           exceptions to the physical delivery rule. 57
           T.C.M. at 874.

     The Court of Appeals for the Sixth Circuit again confirmed

that the exceptions provided in section 7502 are the only ones to

the rule of actual physical delivery.         Carroll v. Commissioner, 71

F.3d 1228 (6th Cir. 1995), affg. T.C. Memo. 1994-229.                  Here,

petitioner     has   failed   to   show     that   section   7502   applies.

Accordingly, petitioner's return is deemed filed on July 1, 1992,

thus making the notice of deficiency timely.

Issue 2.     Backpay Award

     Respondent determined that the $137,918.96 petitioner

received in 1990 as partial settlement of the Title VII claim is
                                 - 11 -


taxable.    Petitioner asserts that this amount received relating

to the Title VII claim is excludable from his gross income.

       In United States v. Burke, 504 U.S. 229, 242 (1992), the

Supreme Court held that backpay awards received in settlement of

Title VII discrimination claims were not excludable from gross

income under section 104(a)(2).     The Supreme Court noted that

"Congress declined to recompense Title VII plaintiffs for

anything beyond the wages properly due them--wages that, if paid

in the ordinary course, would have been fully taxable."       Id. at

241.

       Petitioner argues that respondent cannot apply Burke

retroactively.    We disagree.

       Section 104(a)(2), as it relates to the Title VII claim, was

in effect when respondent mailed the notice of deficiency to

petitioner, and the Supreme Court's holding in Burke construed

but did not change that existing law.     In addition, the Supreme

Court has held:

       When this Court applies a rule of federal law to the
       parties before it, that rule is the controlling
       interpretation of federal law and must be given full
       retroactive effect in all cases still open on direct
       review and as to all events, regardless of whether such
       events predate or postdate our announcement of the rule.

Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 97 (1993);

accord James B. Beam Distilling Co. v. Georgia, 501 U.S. 529

(1991).
                                  - 12 -


     The rule announced by the Supreme Court in United States v.

Burke, supra, must, therefore, be given full retroactive effect

to any open cases.    Accordingly, the $137,918.96 of backpay

petitioner received as partial settlement of the Title VII claim

is taxable income for 1990.

Issue 3.    Withholding Credits

     Respondent determined that petitioner is not entitled to

additional withholding credits of $47,277 for 1991.    Petitioner

asserts that he is entitled to an overpayment based on his claim

to such withholding credits.

     This adjustment originates from an information item reported

to the IRS.    Specifically, the IRS received information that a

Form W-2 was issued to petitioner by the District Court

reflecting an additional $81,669 of income and withholding

credits of $47,277 in further satisfaction of his Title VII

claim.   Upon further review, it was discovered that the Form W-2

was not issued by the District Court and was not a bona fide

document.    Respondent concedes that petitioner did not receive

the additional $81,669.    Furthermore, the District Court did not

remit $47,277 to the IRS on behalf of petitioner.

     For purposes of additional income, petitioner accepts that

the District Court did not issue the Form W-2 and that he did not

receive the $81,669.    Notwithstanding this, petitioner asserts

that he is still entitled to the $47,277 of withholding credits
                               - 13 -


and attempted to claim a refund based on them.     Petitioner has

offered no documentation that $47,277 was paid to the IRS on his

behalf for 1991.   Accordingly, petitioner is not entitled to an

overpayment based on his claim to withholding credits of $47,277

for 1991.

Issue 4.    Unreimbursed Employee Business Expenses

     Respondent determined that petitioner is not entitled to a

deduction for unreimbursed employee business expenses of $8,044

and $5,457 for 1990 and 1991, respectively.     Petitioner asserts

that he is entitled to the deductions.

     Section 162(a) allows a deduction for "all the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business".     Such deductions, however,

are not allowable to an employee "to the extent that the employee

is entitled to reimbursement from his or her employer for an

expenditure related to his or her status as an employee."     Lucas

v. Commissioner, 79 T.C. 1, 7 (1982).

     At trial, petitioner testified that he "could have received

a 100-percent reimbursement from the Government" for these

expenses.    In addition, petitioner failed to substantiate that he

incurred these expenses in the amounts claimed. Accordingly,

since petitioner could have been reimbursed by his employer and

did not substantiate these deductions, he is not entitled to
                               - 14 -


unreimbursed employee business deductions of $8,044 and $5,457

for 1990 and 1991, respectively.

Issue 5.   Addition to Tax Under Section 6651(a)

     Respondent determined an addition to tax under section

6651(a) for delinquent filing of a return.

     Section 6651(a) provides that if a taxpayer fails to file a

return by its due date, including extensions of time for filing,

there shall be an addition to tax equal to 5 percent of the tax

required to be shown on the return for each month the failure to

file continues, not to exceed 25 percent.

     Petitioner had an extension until June 15, 1991, to file his

1990 return.   Petitioner did not file his 1990 return until July

1, 1992.   Petitioner has failed to meet his burden on this issue.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

Accordingly, respondent's addition to tax on this issue is

sustained.

Issue 6.   Penalty Under Section 6662(b)

     Respondent determined that the portion of the underpayment

for 1990 attributable to the disallowance of the unreimbursed

employee business expenses was due to negligence.

     Section 6662 provides for an accuracy-related penalty equal

to 20 percent of the portion of the underpayment due to

negligence.    For purposes of section 6662, negligence "includes

any failure to make a reasonable attempt to comply with the ***
                               - 15 -


[income tax laws]" and disregard "includes any careless,

reckless, or intentional disregard."

     As a general rule, the Commissioner's determinations are

presumed correct, and the taxpayer bears the burden of proving

otherwise.    Rule 142(a); Welch v. Helvering, supra.   Petitioner

did not address this penalty at trial or on brief and has

therefore failed to meet his burden with respect to this issue.

Accordingly, the penalty under section 6662 is sustained.

     For the foregoing reasons, and to take account of a

concession,



                                          Decision will be entered

                                     under Rule 155.
